Contra Revenue
Definition
Accounts that reduce gross sales, such as returns, discounts, refunds and allowances, shown separately so you can see both what you sold and what you gave back.
Want a deeper explanation?
Formula
Net Sales = Gross Sales − Contra RevenueRecording returns and discounts as contra revenue, not as expenses, keeps your margins measured against the right base and lets you see how much you give away to make each sale.
It is also where promo-heavy brands discover their real price. Watch for: refunds netted directly out of sales, which hides a rising return rate.
Example
Gross sales of $210,000 less $14,000 of returns and $9,000 of discounts gives $187,000 of net sales.