A contra revenue account needs while the bookkeeper is preparing some important statements about finances. However, one should always remember that the contra revenue account must be analyzed not separately but together with the revenue account, to see and to calculate the difference between these two accounts.
Contra Revenue Accounts — Examples
It is useful to work with the contra revenue account in the following situations:
- when the two accounts must be kept separately to avoid the loss of important information;
- when a bookkeeper must present the results of financial statements;
- when a bookkeeper or an accountant needs to offset two accounts to calculate the net balance.
There are different types of contra revenue accounts. For example, there is a sales returns contra sales account. It is really useful to work with this account because it contains information about the sales value of products that were returned by the buyer.
Also, there is another type of contra revenue account that is also very wide-spread in bookkeeping and accounting. It is the contra revenue account that is connected with the sales discount. As a rule, one can speak about the settlement discount or cash. As a rule, this account has the following distinguishing features:
- normally, it represents a debit balance, but not a credit one;
- it is offset versus the revenue account that normally represents a credit balance instead of debit one;
- the net balance of the two above-mentioned accounts helps the accountant or bookkeeper to see the net value of currents sales after the customers were provided with the discounts.
Is Unearned Revenue a Contra Account or not
Unearned revenue is not considered to be a contra revenue account. It is revenue that wasn’t earned, but it is calculated in advance. Thus, the balance can be held as a credit in reality.
Useful tips for efficient work
Proper organization of internal document flow in the company, which must be established by order of its head, is of great importance for eliminating shortcomings in accounting.
The order must clearly define the forms of submission of documents to the accounting Department, the timing of their submission, and the persons responsible for this. Strict penalties should also be imposed for late and poor-quality processing of documents.
At the same time, it is necessary to clearly and clearly set up accounting for the receipt of documents to the accounting Department. In case of detection of late submission of documents or their poor quality preparation, the chief accountant must (perhaps after one or two warnings) submit a report to the head and seek to impose appropriate sanctions on those responsible with their announcement in order for the company. In addition, it is important, if possible, to assign the responsibility for obtaining corrected documents to the same perpetrators. This will convince the latter that it is much better to immediately monitor the correctness of the document received from contractors or from their subordinates, than to force them to make another document, eliminating errors.
It will not be superfluous to organize in the accounting Department visual accounting of the preparation and timely submission of accounting documents to the tax authorities by employees of the accounting Department, indicating the timing and those responsible for drafting and checking.
In order to improve the professionalism and competence of accounting employees, it is necessary to constantly improve their skills at special courses, participate in specialized seminars, etc., and regularly receive and study special literature.
It is also advisable to regularly (at least once a month) conduct a collective (possibly in groups) study of existing guidance documents in the accounting Department, as well as timely updates of the software used.
The new accounting rules must be immediately communicated to the performers under the signature and leave them a copy of the guidance document. Copies of the guidance documents for the relevant areas of accounting should be in separate folders.
A comprehensive way to determine the correctness of accounting in an organization is to compare the results of inventory with accounting data on the corresponding date. As you know, inventory should cover not only checking inventory, but also all assets, liabilities, etc. During the inventory, real data must be established for all accounting accounts (balance sheet items) on the corresponding date.
If the results (data) obtained during both the inventory at the beginning of the period and the inventory at the end of the reporting period coincide with the data of the relevant accounting accounts (balance sheet items), then there is some confidence that during this period, accounting covered the full activities of the organization.
In case of a discrepancy of any indicators, the audit of accounting employees should start with the accounting data, and only after establishing the correctness of accounting data to make claims to other divisions of the company.