Contra liabilities
Contra liabilities are common in companies that sell bonds to raise capital. To drum up interest in the bond, the company will sell it at a discount. For example, a bond with a principal amount of $1,000 may be sold for only $950. The bond is listed on the balance sheet at the full amount of $1,000, but the cash received is just $950, so a contra liability for the discount is listed to make the entry balance.
Contra equity and contra revenue
The equity section of the balance sheet is where the shareholder's claims to assets are reported. The main contra equity account is treasury stock, which is the balance of all stock repurchased by the company. When a company repurchases shares, it increases the fractional ownership of all remaining shareholders.
Revenue is an income statement account, but it flows through to the equity section of retained earnings as well. The contra revenue accounts are discounts and returns. Any products that are sold at a discount or returns are deducted from gross revenue to produce net revenue as the top line on the income statement.
Example of a contra account
Let's look at the contra accounts discussed above on Home Depot's (HD -1.80%) balance sheet.
Contra assets