Contra Account
A Contra Account is a special type of bookkeeping tool that works like a minus sign in accounting. It's used to reduce the value of a related main account while keeping a clear record of both the original amount and the reduction. Think of it like keeping track of both the full price of items in a store and their discounts separately, instead of just writing down the final price. Bookkeepers and accountants use contra accounts to maintain transparent financial records. For example, when tracking how much equipment a company owns, they'll have one account showing the original cost and a contra account showing how much value it has lost over time (depreciation).
Examples in Resumes
Managed Contra Accounts to accurately track depreciation of company assets worth $2M
Implemented Contra Account system for tracking sales returns and allowances
Reconciled Contra Accounts and primary accounts to ensure accurate financial reporting
Typical job title: "Bookkeepers"
Also try searching for:
Where to Find Bookkeepers
Professional Associations
Online Communities
Job Boards
Example Interview Questions
Senior Level Questions
Q: How would you explain the importance of contra accounts in financial statement presentation?
Expected Answer: A senior accountant should explain how contra accounts provide transparency in financial reporting by showing both gross and net amounts, and how this helps in making better business decisions. They should give examples like accounts receivable and allowance for doubtful accounts.
Q: Can you describe a situation where you used contra accounts to solve a complex accounting issue?
Expected Answer: They should provide specific examples of using contra accounts in challenging situations, such as managing large asset depreciation schedules or handling complex sales return systems, while maintaining accurate financial records.
Mid Level Questions
Q: What are the common types of contra accounts you've worked with?
Expected Answer: Should be able to discuss various contra accounts like accumulated depreciation, sales returns and allowances, and allowance for doubtful accounts, with basic examples of how each is used.
Q: How do you ensure contra accounts are properly reconciled?
Expected Answer: Should explain the process of matching contra accounts with their primary accounts, verifying balances, and ensuring accuracy in financial statements.
Junior Level Questions
Q: What is a contra account and why is it used?
Expected Answer: Should be able to explain that a contra account reduces the balance of a related account and provide a simple example like how accumulated depreciation reduces the value of assets.
Q: Can you explain the difference between a regular account and a contra account?
Expected Answer: Should explain that regular accounts show positive balances while contra accounts typically have opposite balances to offset their related accounts, using simple examples.
Experience Level Indicators
Junior (0-2 years)
- Basic understanding of contra accounts
- Recording simple contra account entries
- Basic reconciliation skills
- Understanding of double-entry bookkeeping
Mid (2-5 years)
- Managing multiple contra accounts
- Reconciling complex accounts
- Preparing financial statements
- Understanding of advanced bookkeeping concepts
Senior (5+ years)
- Advanced financial analysis
- Training junior staff on contra accounts
- Implementing accounting policies
- Managing complex depreciation schedules
Red Flags to Watch For
- Unable to explain basic contra account concepts
- Lack of experience with double-entry bookkeeping
- No knowledge of basic accounting software
- Poor attention to detail in account reconciliation
