What is a contra account?
Definition of contra account
A contra account is one of the accounts in your business's general ledger. It's used as a "holding bay" for transactions that will come into your business accounts and go straight back out again.
Example of a contra account:
The most common example for using the contra account is if you receive a cheque that bounces.
You would put both the incoming sum for the original cheque, and the money going back out again when it bounces, into the contra account.