What Is a Contra Asset?

by Greg DePersio

0 min read

A contra asset is a line item on a balance sheet, in its own account, that is either a credit balance or zero balance. A contra asset account offsets against another asset account. A normal asset has a debit balance and a contra asset nets against this to show the net balance of both assets. In some sense, a contra asset can be considered a negative asset.

The two most common contra accounts on a balance are accumulated depreciation and the allowance for doubtful debts. Accumulated depreciation tallies the depreciation to date of a fixed asset, while the allowance for doubtful debts contra account allows for some write offs of accounts receivable.

For example, if a business has accounts receivable of $50,000 and an allowance for doubtful debts account totaling $5,000, the net accounts receivable would be $45,000.

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