What is Contra Entry: Meaning, Examples

What Is a Contra Entry?

Let us see what a contra entry is today. Actually, in contra entry, the transactions involved are those which we already know very well, such as withdrawing money from an ATM or depositing money into the bank.

What Is a Contra Voucher?

A contra voucher is used to record transactions where cash and bank accounts are involved together, such as cash deposited into the bank or cash withdrawn from the bank.

Explanation of Contra Entry

In entry, both cash and bank accounts are involved. This means that both cash and bank accounts are affected.
You can also understand this in a simple way — money is taken out from one pocket and put into another pocket. Because of this, the company’s financial statements are not affected, but the effect of contra entry is always there for record and monitoring purposes.

Examples

Cash Withdrawn from Bank

For example, if cash is withdrawn from the bank for office or monitoring purposes, then the entry will be:
Cash Account Debit to Bank Account Credit.

Cash Deposited into Bank

If cash is deposited into the bank, then the entry will be:
Bank Account Debit to Cash Account Credit.

Effect of Contra Entry In entries:

• One account increases while the other decreases.
• Both debit and credit aspects are recorded in the same cash book.
• The transaction affects both sides of the cash book.

Other Types of Contra Transactions

Apart from this, there are two more types of transactions that come under entry:

• Transfer of funds from one bank account to another bank account.
• Transfer of cash into petty cash.

All these transactions affect both cash and bank accounts. The involvement of both cash and bank accounts is the primary rule of contra entry.

Contra Entry in Cash Book

When a entry is recorded in the cash book, it appears in a specific manner.
For example, if the transaction is cash withdrawn from the bank, you will see that a large amount is withdrawn from the bank on one side, and on the other side, the opposite effect is shown.

Because this transaction has an opposite-side effect, it is called a contra entry. The word “contra” is derived from a Latin word, which means “opposite.”

Indication of Entry

To indicate a entry, the letter “C” is written in the folio column.
In accounting software also, a separate option is provided specifically for contra entries.

Conclusion

Contra entries help in accurately recording internal fund movements between cash and bank accounts. Understanding how to record contra entries is essential for maintaining correct accounting records.