Setting up Contra Accounts is fairly easy although it does take a bit of preplanning.

Yes it does make a difference on how you go about setting up the Contra Account depending on whether you want to affect the Income or Expense section of the P&L.

First, I will show you two Contra Accounts that have already been created and in use that affect Gross Sales.

The key here (i.e., the trick) is that the box explaining that this product is sold has been chosen. This designation assigns it to Sales Income.

Setting up a Cost of Services (COG) account that will decrease Gross Sales and result in lower Net Revenue / Net Sales on the P&L is similarly to how the photos above depict the steps.

However, since I want to have a subtotal on the P&L of Sales Income that represents Gross Sales - Refunds - Commissions/Referrals, I will not make the COG a subcategory of the Sales Income COA.

In fact, QBO has a distinct Account Type named COG that will be used.

Now comes the tricky part (at least for me in this particular case). Since I want to record third-party vendors services provided to me that are a part of the direct cost of providing the service I sell to my customers, I am going to create a Product / Service that I buy (not sell) and map it to the COG Account I just created. 

See below and compare this contra account to the previous two show above. All three n

So the steps in the order to be taken for a contra account that affects Income and be labeled as COG or Cost of Services are as follows:

1. Create the requisite COA using COG account type.

2. Create the Product / Service you want to designate to be used for this Direct Cost and map it to the COA created above.

2A. Check the box I sell this product/service if you need to assign to a Customer Invoice.

2B. Check the box I buy this product/service if you need to assign to a Vendor Invoice.

My apologies for not addressing the specific question about Accumulated Depreciation.

Hope this discussion helps someone who comes across this thread like I did a few hours ago and couldn't find the answer I was expecting to see that would confirm the approach I've been taking.

Best Regards

mkm2