Often businesses look for a way out to account for damaged inventory, accumulated depreciation, returned merchandise, etc. Now let’s start how to set up a Contra Revenue Account in QuickBooks.
When these things are not accounted for, it creates a negative impact on the business. This is where contra accounts come into existence. Contra accounts can be used to register the inventory that has been damaged, goods returned by customers, equipment depreciation, etc.
In tune with this, a contra-revenue account is used by companies to figure out the items sold and the ones that are not.
What is a Contra Revenue Account?
Contra revenue refers to deductions made from the gross revenue reported by a business. Which results in net revenue. In simple words, a contra revenue account should have a balance that should be the opposite of a usual credit balance in a particular revenue account.
A contra revenue account empowers a business to determine the exact amount sold, along with the products that reduced the sales significantly to the net sales amount.
Here are two best examples of Contra Revenue Accounts:
- Sales Discounts
- Allowances and Sales Returns
Along with these, examples of a contra-revenue account also include sales allowances. As a business owner, you should always debit the contra revenue account, and the corresponding revenue accounts should be credited.
How Contra Revenue Accounts can help you?
Such types of accounts are a real boon for the business. These accounts highlight the amount that offsets a paired related specific account. For a business owner, it is imperative to comprehend how to set up a contra revenue account that provides you with the podium to prepare and manage precise financial records.
Please note that it is crucial to report contra accounts on the related accounts should report on the same financial statements. If you are handling the books of accounts of your company, kindly make sure to report the contra account on your specific financial statement on the particular line item which is right below the main account.
How to Set Up a Contra Revenue Account in QuickBooks?
Here is how you can easily set up a Contra Revenue Account in QuickBooks:
- In your QuickBooks account, click the Accounting option on the left side of the pane
- Choose Chart of Accounts
- Select Newly visible on the upper right side
- Choose the Accounting type, Name, and Detail type of the account
- Select Save and Close
Setting up a contra revenue account for business is crucial to keeping the book of accounts accurate and dispute-free. Hence, it is highly recommended that every business owner should do it at the earliest.
If you get stuck while adhering to the above-mentioned steps, it is highly recommended to talk to an expert in the field.
What is the purpose of a contra-revenue account in QuickBooks?
A contra-revenue account offsets gross revenue, allowing a business to report net revenue accurately.
How do I customize the name of the contra-revenue account?
Yes, you can customize the contra revenue account name during the setup process in QuickBooks
Can I edit the contra revenue account settings later?
Yes, you can edit or modify the contra revenue account settings as needed in QuickBooks.
Is it possible to delete a contra revenue account in QuickBooks?
Yes, you can delete a contra-revenue account, but only if it has no associated transactions or balances.
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