What are contra entries and how are they recorded?

The word “contra” means opposite or against. This entry involves both a cash account and bank account. In this, entries are recorded on the debit and credit sides of the cash book at same time.

These entries are not recorded in ledger accounts because both aspects (credit and debit) are in double column cash books. Letter “C” is written in the posting reference column which represents contra entry.

If cash is taken from the bank, due to business purposes then contra entry is made. If cash is taken for personal use, then it is recorded in the credit side of the bank column of the cash book.

The contra entries are recorded, when the following conditions occur −

• Money is withdrawn from the bank for office use.
• Money is taken from the office (cash) and deposited in the bank.

Money withdrawn from bank for office use − When money is withdrawn from the bank then it is recorded on the debit side. It is written in particular as “Bank account”. In the bank column, it is recorded on the credit side and in particular it is written as “cash account” for the same cash.

Money taken from office (cash) and deposited in bank − When amount is deposited in bank then it is recorded in the debit side of bank column of cash book. It is written in particular as “cash account”. In the cash column, it is recorded in the credit side of the same cash book and in particular it is written as “Bank account”.

Recording contra entries

Let us learn how to record contra entries in the following scenarios −

Cash deposited in bank account

Cash is taken from bank

Cheque is received