Contra Entry in Accounting: Definition, Example etc.

What is Contra Entry?:

Contra entry refers to transaction which affect 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.”

Again, we can say, any transactions relating to transfer of Cash between one cash a/c to another cash a/c, or one cash a/c to another bank a/c or one bank a/c to another bank a/c or cash a/c, is called a contra entry.

The contra transactions can be transferred in the following manner:

  • Cash deposited to Bank A/c
  • Cheque withdrawn from the bank and transferred in Cash A/c.
  • Transfer from one Bank A/c to another Bank A/c
  • Cash A/c to Petty Cash A/c.

The transactions incurred in the above manner, will be considered as a contra entry.

However, a contra entry is also used in the inter company netting to offset receivables and payables between two different legal entities/subsidiaries of a company so that one final amount remains.

Examples of Contra Entry:

Here is the list of transactions from where you can identify the contra entry and non-contra entry. The reasons are stated for your easy understanding:

EntriesIs it Contra Entry?Reasoning
$500 transferred to Petty CashYesAffects both two accounts- Cash A/c & Petty Cash A/c.
Cash Sales made $1250NoAffect only one A/c i.e only Cash A/c.
Received a cheque from Jerry & Bros. $4,500, deposited into bank a/cNoOnly one A/c affect-Bank A/c.
Rent paid by Cash – $125NoOnly one A/c affect i.e Cahs A/c.
Deposited $ 500 into Bank A/cYesAffects two accounts – Cash and Bank A/c
Cash $ 300 withdrawn from Bank for office purposeYesAffects two accounts – Cash & Bank A/c
Withdraw Cash $100 for personal useNoAffects only one A/c i.e. Cash A/c.

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