Accumulated depreciation, purchase discounts and purchase returns are examples of contra accounts. Accumulated depreciation is a contra account in the assets portion of the balance sheet. Purchase discounts and returns are contra accounts that debit the cost of goods sold account on the income statement.
Contra accounts are used for adjusting general ledger accounts. The balance of a contra account offsets the account that needs adjusting. When an asset or liability is disposed of, the balance of its paired contra account decreases. Contra accounts are used with assets, liabilities, revenue and equity accounts. Other examples of contra accounts include allowance for doubtful income, accumulated depletion and discount of bonds payable.