Contra Revenue

Contra revenue is an account that reduces total revenue on a company’s income statement. It’s used to record items like sales discounts, returns, and allowances, ensuring that net revenue reflects actual earned income.

Common Contra Revenue Accounts:

• Sales Discounts: Price reductions offered to customers for early payment.

• Sales Returns: Value of returned goods.

• Sales Allowances: Price adjustments for defective or damaged goods.

Purpose:

• Maintains transparency in financial reporting.

• Ensures compliance with accounting standards like IFRS and GAAP.

• Aids in accurate profitability analysis.