Contra Account

An account that reduces the balance of a related account on the financial statements.

A contra account carries a balance opposite to its paired account, offsetting it on the balance sheet or income statement. Accumulated depreciation, which reduces the gross value of fixed assets, and allowance for doubtful accounts, which reduces receivables, are common examples used to show an asset's net, more realistic value.

Accumulated depreciation is recorded as a contra account, lowering the equipment's book value each year.