Adjunct account definition
/What is an Adjunct Account?
An adjunct account increases the valuation of a liability account. In essence, the credit balance in this account is added to the liability account with which it is paired. An adjunct account may be considered a valuation account, since (on an aggregate basis) it alters the value of the account with which it is related. Adjunct accounts are rarely used in smaller businesses that deal with relatively simple business transactions.
Examples of Adjunct Accounts
There are several adjunct accounts that an organization may use, including the following:
Unamortized bond premium. This account is used when a business sells bonds at a premium. The unamortized bond premium and the bond liability, when combined, represent the actual liability of the bond issuer.
Unrealized gains on investments. When investments increase in value, unrealized gains can be recorded in an adjunct account to show the higher market value.
FAQs
How Does an Adjunct Account Differ From a Contra Account?
An adjunct account differs from a contra account in that it increases the balance of the related account, whereas a contra account decreases it. For example, a bond premium is an adjunct account that increases the carrying value of bonds payable, while a discount on bonds payable is a contra account that reduces it. Both are used to provide more detailed and transparent reporting of the underlying account.