Today we will explain contra accounts, and we will also do some examples to demonstrate how the debits and credits work.

5 - Contra Accounts - Understanding Them & Examples

Accounting 101 Podcast by James Edward Stewart, CPA/ABV, CFE

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Update May 2020

I've read a lot of boring stuff so that you don't have to! Today we will summarize some of the useful information in the FASB Concepts Statements and other literature. 
This information will be useful as you move along to more advanced levels of accounting.

17 - The Objectives of Financial Reporting & Concepts of Accrual Accounting

Example: You own a sole proprietorship. For this period, you had revenue of $100,000, wage expense of $40,000, and computer expense of $30,000 (net income of $30,000). You also contributed $10,000 to the business this period.
Step 1 – Transfer Revenue and Expense items to Income Summary
                                                             Debit           Credit
Revenue                                        $100,000
            Income Summary                                  $100,000
Income Summary                       $40,000
           Wage Expense                                           $40,000
Income Summary                       $30,000
           Computer Expense                                  $30,000
Step 2 – Transfer Income Summary to Equity (capital account)
                                                                  Debit           Credit
Income Summary                            $30,000
           Capital Account – YOUR NAME                 $30,000
Step 3 – Transfer contribution/distribution accounts to capital account
                                                            Debit          Credit  
Contributions – YOUR NAME     $10,000
          Capital Account – YOUR NAME           $10,000
      

16 - Closing the Books at the End of the Period (The Closing Process)

 Today we will go over the adjusting process. This is where we make our adjusting journal entries to get from our unadjusted trial balance to our adjusted trial balance, which contains the figures we use on the financial statements and tax returns.
We will briefly discuss prepaid expenses, unearned revenues, accrued revenues, accrued expenses, and depreciation/amortization. 

15 - Adjusting Journal Entries (The Adjusting Process)

Today we will discuss the accounting cycle. This is the process taken each period to record transactions, prepare the financial statements, and to reset the temporary accounts to zero for the next period.
Keep in mind that the steps you may see in your accounting textbook or elsewhere may be slightly different - I have simplified some of the steps:
Step 1 – Record transactions as journal entries in the general ledger;
Step 2 – Prepare an unadjusted trial balance as of the end of the period;
Step 3 – Prepare adjusting journal entries and record on general ledger;
Step 4 – Prepare an adjusted trial balance as of the end of the period;
Step 5 – Prepare the financial statements;
Step 6 – Prepare and record closing journal entries to reset temporary accounts;
Step 7 – Prepare a post-closing trial balance.

5 - Contra Accounts - Understanding Them & Examples

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