A contra account that is used to adjust an owners’ equity (stockholders’ equity) account by reducing it to arrive at its net value. Examples of contra equity accounts include the treasury stock account, the owners’ drawing account, and a dividend account. The increase in contra equity is equivalent to a decrease in equity, and vice versa. Assume that a firm has made a cash disbursement to buy back its stock (treasury stock). The treasury stock is not an asset, per se. The payment of cash to existing owners is a distribution which increases the contra equity account dubbed “treasury stock account”.

A contra equity account has a debit balance (as opposed to equity that has a credit balance).

It is also called a contra owners’ equity account.