A contra owner's equity account is the equity variety of a contra account: an account that sits in the equity section but carries a debit balance, so that it reduces total owner's or stockholders' equity instead of adding to it. The main entry explains contra accounts in general, including the more familiar contra-asset and contra-liability types.
Common examples
In a sole proprietorship or partnership, the main example is the drawing account. It records cash or other assets the owner takes out for personal use, also called withdrawals by owner. Drawings are not an expense, so they do not appear on the income statement; at year end the drawing account is closed into the owner's capital account, reducing it.
In a corporation, the best-known example is treasury stock, which records the cost of shares the company has bought back from shareholders. It is shown as a deduction within stockholders' equity. Other items sometimes presented the same way include a discount on capital stock and, in some formats, accumulated other comprehensive losses.
Keeping these amounts in separate accounts, rather than reducing capital directly, preserves the original figures for contributed capital and makes it easy to see how much has been withdrawn or repurchased during a period.