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Usually, credit balances include items from one of those two natures. This account appears next to the current asset Accounts Receivable. The account Allowance for Doubtful Account is credited when the account Bad Debts Expense is debited under the allowance method. The use of Allowance for Doubtful Accounts allows us to see in Accounts Receivable the total amount http:\/\/www.chicagopowerandprocess.com\/faq\/<\/a> that the company has a right to collect from its credit customers. The credit balance in the account Allowance for Doubtful Accounts tells us how much of the debit balance in Accounts Receivable is unlikely to be collected. Some of the most common contra assets include accumulated depreciation, allowance for doubtful accounts, and reserve for obsolete inventory.<\/p>\n<\/p>\n The accounting entries for a discount on notes receivables are as follows. Allowance for receivables is an account that companies maintain to record possible bad debts. However, this account does not represent actual irrecoverable debts.<\/p>\n<\/p>\n When a contra asset account is first recorded in a journal entry, the offset is to an expense. For example, an increase in the form of a credit to allowance for doubtful accounts is also recorded as a debit to increase bad debt expense. Last, for contra revenue accounts there are sales discounts, sales allowances, or sales returns. These contra revenue accounts tend to have a debit balance and are used to calculate net sales. Allowance for doubtful accounts is contra asset accounts that offset the accounts receivable.<\/p>\n<\/p>\nContra Revenue Account<\/h2>\n<\/p>\n