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A business has a balance due from a customer on its accounts receivable ledger, but also owes the customers business an amount on its accounts payable ledger for goods supplied. A contra entry is used to offset the two amounts, leaving a net amount outstanding to the customer.
Contra means against. In bookkeeping terms, a contra expense account refers to an account which is offset against an expense account.
As an expense account is normally a debit balance, a contra expense account will normally be a credit balance. When the two balances are offset against each other they show the net balance of both accounts.
Contra means against. In bookkeeping terms, a contra revenue account refers to an account which is offset against a revenue account.
As a revenue account is normally a credit balance, a contra revenue account will normally be a debit balance. When the two balances are offset against each other they show the net balance of both accounts.