What is a Contra Asset General Ledger Account?
The word contra means to contradict. As it applies to assets, in essence it’s a contradiction to a normal asset. Assets general ledger (GL) accounts normally maintain a debit balance. On the contrary, a contra asset account normally carries a credit balance. The contra accounts, as it applies to assets, are generally used to make an adjustment to the value of an asset. Contra Account – Depreciation and Amortization In accounting terms, depreciation and amortization both refer to the devaluation of assets overtime. Depreciation is the devaluation of fixed assets like equipment, vehicles and buildings. Amortization is an intangible asset like patents, contracts and trademarks. As an asset loses its value, the loss in value is charged as an expense. The offsetting reciprocal journal entry to the expense is a decrease in the actual assets value. Since depreciation and amortization carries a credit balance, it is known as a contra asset. document.getElementById(‘adsense_placeholder_2’).inne
