motkonto

Motkonto, or contra account, is an accounting term for an account used to offset or reduce the balance of another related account. It is a separate line item that holds a balance opposite to its paired account, helping to present net figures on financial statements. Motkonton are common in many accounting systems and are used to track adjustments, reductions, or allowances without altering the original account directly.

The main purpose of a motkonto is to reflect deductions or adjustments in a transparent way. By separating the offset from the primary account, financial statements show both the gross amount and the deduction, enabling clearer analysis and comparability.

Typical examples include:

- Accumulated depreciation, a contra asset to fixed assets, with a credit balance that reduces the asset’s net book value.

- Allowance for doubtful accounts, a contra asset to accounts receivable, reducing the net realizable value of receivables.

- Sales returns and allowances, a contra revenue to gross sales, lowering reported revenue.

- Purchase returns and allowances, a contra to purchases, reducing the cost of purchases.

- Treasury stock, a contra equity account that reduces total shareholders’ equity.

In double-entry bookkeeping, transactions involving motkonto adjust both the related account and the contra account. For example, recording depreciation affects depreciation expense and increases accumulated depreciation; recording a doubtful debt affects bad debt expense and increases the allowance for doubtful accounts; recording a return affects the sales returns and allowances and the receivable or cash account. On financial statements, motkonton are typically presented within the related line item or disclosed separately to show net values.

Etymology: the term originates from Swedish accounting, where motkonto translates to contra account; the concept exists in many accounting traditions under the English term contra account.