A contra account is an account that reduces the balance of its reciprocal account. The best example of a contra account is accumulated depreciation. It reduces the balance of the asset account it is partnered with. Assets like equipment, machinery, building, and automobiles are common asset accounts that are partnered with an accumulated depreciation account. The accumulated depreciation account is a typical contra account; it reduces or offsets the asset it is partnered with.
Ex: Adequate Disclosure buys equipment on January 1st for $1,000 with a salvage value of $500, and an expected life expectancy of 5 years. Assuming straight line depreciation method.
Here is the Balance Sheet at year end:
As you can see Accumulated Depreciation is shown on the balance sheet offsetting the Equipment account.