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- Cheque withdrawn from the bank and transferred in Cash A/c.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:
|Entries||Is it Contra Entry?||Reasoning|
|$500 transferred to Petty Cash||Yes||Affects both two accounts- Cash A/c & Petty Cash A/c.|
|Cash Sales made $1250||No||Affect only one A/c i.e only Cash A/c.|
|Received a cheque from Jerry & Bros. $4,500, deposited into bank a/c||No||Only one A/c affect-Bank A/c.|
|Rent paid by Cash – $125||No||Only one A/c affect i.e Cahs A/c.|
|Deposited $ 500 into Bank A/c||Yes||Affects two accounts – Cash and Bank A/c|
|Cash $ 300 withdrawn from Bank for office purpose||Yes||Affects two accounts – Cash & Bank A/c|
|Withdraw Cash $100 for personal use||No||Affects only one A/c i.e. Cash A/c.|