A Contra-Asset account will typically have a credit balance. The Contra-Asset accounts accumulate amounts that are reductions of Assets. The most common Contra-Asset accounts are:

• Allowance for Doubtful Accounts - an estimate must be made at the end of each accounting period to account for expected losses related to uncollectible accounts. This account is shown as a reduction of the Accounts Receivable balance on the balance sheet.
• Accumulated Depreciation - as an asset is depreciated over its useful life, the amount of depreciation is recorded in the Accumulated Depreciation account. This account is shown as a reduction of assets on the balance sheet.

NOTE: The reason it is important to classify an account as a Contra-Asset account for RecWizard purposes is that the “normal balance” will always be a credit.