CONTRA ASSET Meaning and
Definition
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A contra asset is a type of asset account that reduces the total value of a company's assets. It is listed on the balance sheet as a negative asset, usually shown with parentheses surrounding the amount. The purpose of a contra asset account is to represent an offsetting adjustment to the value of another asset account.
Contra assets are used to reflect the decrease in value or the adjustment required for specific assets that are expected to lose value or may not be fully collectible in the future. These accounts are created in order to provide a more accurate representation of the company's net assets.
One common example of a contra asset is the allowance for doubtful accounts, which offsets the accounts receivable account. This contra asset is used to recognize that some customers may not pay their outstanding invoices, and therefore, the accounts receivable amount needs to be adjusted downward to reflect the anticipated losses.
Another example of a contra asset is accumulated depreciation, which offsets the fixed assets or property, plant, and equipment account. This contra asset represents the decrease in value of these assets over time due to wear and tear, obsolescence, or other factors.
Contra assets are important in financial reporting as they provide transparency to financial statements by reflecting the potential risks and losses associated with certain assets.
Common Misspellings for CONTRA ASSET
- xontra asset
- vontra asset
- fontra asset
- dontra asset
- cintra asset
- ckntra asset
- clntra asset
- cpntra asset
- c0ntra asset
- c9ntra asset
- cobtra asset
- comtra asset
- cojtra asset
- cohtra asset
- conrra asset
- confra asset
- congra asset
- conyra asset
- con6ra asset
- con5ra asset
Etymology of CONTRA ASSET
The word "contra" comes from the Latin word "contrā", which means "against" or "opposite". In accounting, "contra" is used to indicate an opposite or offsetting account.
The term "asset" stems from the Latin word "ad+satis", which means "to enough" or "to satisfy". It refers to something of value that is owned or controlled by an individual or entity, which can be used to generate future economic benefits.
When "contra" is combined with "asset", the term "contra asset" refers to an account that is offset against another related asset account. It is used to reduce the carrying value of an asset to reflect a more accurate representation of its true value or to record specific transactions or events that directly affect the main asset account.
