Contra Entries in detail

Contra entry refers to transaction which affects both Cash and Bank simultaneously, i.e. where debit and credit are Cash or Bank A/c. The word “contra” means “Opposite” which is a Latin word.

The voucher which records contra entry is called “Contra Voucher.”

 

In other words, when the two accounts involved in a transaction are cash account and bank account, then both the aspect are entered in cash book itself. As both the debit and credit aspect of a transaction are recorded in the cash book, such entries are called contra entries.

 

ACCOUNTING TREATMENT FOR CONTRA ENTRIES

 

A Contra entry is required only in the following two transactions :-

  1. Cash withdrawn from the Bank.
  2. Cash deposited to Bank a/c.

 

Contra entries are marked with letter ‘C’ in the Ledger Folio Column. Such entries are not posted in the Ledger as both accounts (i.e., Cash Account and Bank Account) involved appear in the cash book.

 

Example of Contra Entry :-

 

Cash deposited into the bank Rs. 30,000. Here, Bank Account is to be debited and Cash Account is to be credited. Debit aspect is to be recorded in the debit side of the Three column Cash-Book (bank column) and credit aspect is to be recorded in the credit side (cash column).

Cash withdrawn from Bank for office use Rs. 30,000 Here, Cash Account is to be debited and Bank Account is to be Credited. Debit aspect is to be recorded in the debit side of the three column Cash Book (bank column) and credit aspect is to be recorded in the credit side (bank column).

 

In the above two cases Cash should be treated as contra of Bank and Bank should be treated as contra of Cash.

 

Contra entry has no ultimate affect in the business. When a contra entry is made, the affect is transferred from one account to another. But no result is created in the business.

For example when cash is deposited to bank, It is just moving of fund (current asset) from cash  account to bank account.

 

Thus, in simple words contra entry is Bookkeeping entry that is entered on the opposite side of an earlier entry to cancel its effect on the account balance.

 

 

 

Accounting & Finance for Banking

Principles & Practices of Banking Module E Pdf

Free
Module E PPB ePDFs available in our android app. Get them all at https://iibf.info/app

Accounting and Finance for Banking Module A Pdf

Free
Accounting and finance for bankers all ePDFs are available in our an app. Get them all at https://iibf.info/app

Accounting and Finance for Banking Module A Pdf

Free
Accounting and finance for bankers all ePDFs are available in our an app. Get them all at https://iibf.info/app

Leave a reply

Please enter your comment!
Please enter your name here

Popular

Free Live Classes

spot_img

More from author

All about KYC/AML Exam by IIBF

All about KYC/AML Exam by IIBF The KYC/AML is a professional certification exam in Anti Money Laundering and Know your customer conducted by the Indian...

CCP- Certified Credit Professional Course by IIBF

IIBF CCP (Certified Credit Professional) exam is an All-India Exam directed by the Indian Institute of Banking and Finance (IIBF) to select competent candidates...

What is Digital Banking in Detail

Digital Banking is the automation of traditional banking services. It is defined as banking done through the digital platform, doing away with all the...

Digital Banking Course By IIBF

Digital Banking Course By IIBF Certificate course in Digital Banking is conducted by IIBF to provide practicing bankers a sound foundation in the digital banking...