Contra asset

A contra asset is a type of contra account. In this, an item is entered on the asset side of an accounting ledger, even though the item has a credit (negative) balance.

A contra asset makes adjustments for the value of an asset. Hence, the amount covering an asset is listed as a contra asset.

In thrift institutions, contra assets include such items as deferred income and loans in process. Other examples of contra assets are accumulated depreciation and accumulated amortization of assets. In accumulated depreciation, what happens is that over time as an asset loses value, the loss in value is listed as an expense so that the asset is now recorded as a debit. Since depreciation carries a credit balance, it is known as a contra asset.

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