What is an asset counter account

An asset counter account is an asset account where the balance will be either a credit balance or a zero balance. (A debit balance in an asset account will violate the cost principle.) Since a pro balance in an asset account is contrary to the normal or expected debit balance.

The most common asset counter account is accumulated depreciation. Accumulated depreciation is associated with property, plant and equipment and is credited when depreciation expense is recorded. Recording credits in accumulated depreciation means that the cost of property, plant and equipment continues to be reported. Reporting accumulated depreciation separately allows readers of the balance sheet to see how much of the cost has been depreciated and how much has not yet been amortized.

Another asset counter account is the provision for bad debts. This account appears next to the current assets of accounts receivable. The correcting account for doubtful accounts is credited when a company enters the amounts estimated as debits to bad debt expenses by the allocation method. The use of the provision for bad debts allows the reader to observe the amounts documented in the accounts receivable that the company has the right to collect from its credit customers. The separate credit balance in the bad debt provision account tells the reader how much of the debit balance in accounts receivable is unlikely to be collected.

A less common example of an asset counter account is the discount receivable. The credit balance of this account is amortized or assigned to interest income or interest income during the life of a document receivable.

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