Published on:
December 29, 2022
Reddy Mohith

Contra Entry: Format, FAQs etc

While individuals routinely engage in various financial exchanges, the diverse manners by which we conduct transactions often obscure the underlying accounting mechanics. Some withdraw paper currency from automated tellers, others digitally transfer balances between accounts at differing financial institutions, and increasing numbers opt for contactless payment apps which facilitate instantaneous funds transmission 'twixt counterparties. Transactions involving physical money or direct bank account modifications require a contra account be posted - a contra account being bookkeeping nomenclature for recording a matching credit or debit so as to maintain a balanced set of ledger accounts. This guide aims to illuminate the purpose and practice of contra entries so their mechanics no longer befuddle.

What is a Contra Entry?

Contra entries shift funds between connected accounts, necessitating offsetting debits and credits. Cash or banking exchanges between two comparable types of accounts, or between cash and its related bank balance, are contra in nature. Namely, contra movements circulate resources internally between financially aligned records. Contrary to the opposite, derived from Latin – appropriately describing internal account exchanges that balance one another. Contra vouchers formally document such offsetting internal postings.

Instances of contra shifts include:

1. Transferring amounts from a checking account into an attached petty cash fund.

2. Depositing accumulated daily revenue into the business's associated bank balance.

3. Moving available capital between two associated business savings accounts.

4. Redistributing excess till amounts between two sectional registers inside a multi-counter retail location during an interval of heavy customer traffic.

The final example on redistributing cash registers' excess funds among one another inside a busy store is not immediately clear upon an initial review. However, circulating money between internally connected cash boxes maintains equivalent balances across all registers.

To shed light on the topic, one must come to understand the function of a "Petty Cash Account" further. It is common practice for businesses to maintain a small sum of money for incidental costs like filing expenses, light snacks, papers, and other minor fees.

Receipts are collected and later reimbursed from the petty cash reserve whenever such minor expenditures occur. Cash is moved from the primary account into the limited funds allocated for petty matters. This process of allocating capital to the limited account for disbursals is what is meant by "funding" a petty cash account.

What is a Cash Book?

A cash book serves as a traditional accounting record used to separately track cash and bank transactions. Dual posting entries are logged within this single ledger containing opposing credit and debit columns. Complex contra entries are made concurrently through cross-referencing affected accounts.

Entries on the debit side credit the bank account, listing "To Cash A/c" in the detail section alongside the amount in the opposing bank column. Conversely, credit postings debit cash by entering "By Bank A/c" alongside the corresponding sum in the cash column.

Such contra items are designated with a "C" in the appropriate column, indicating no further journal entries are needed. They represent reciprocal adjustments neutralizing within the cash book itself rather than elsewhere in the general ledger.


Contra entries traditionally affect the cash and the bank accounts in complex ways. All debit transactions with a Dr (debit side) on top will have a 'To.....' entry, whereas the destination account will have a Cr (credit side) on top of the column and a 'By......' entry. You must pass two entries in a single-entry book when two accounts are affected from one account to another, with some transactions requiring more care than others. As a result, the double entries method is used, in which transactions are recorded twice in varied ways, side by side, to avoid confusion. The following illustration will help clarify the format with its depictions of longer, more involved exchanges alongside briefer ones.

The Cash account and Bank account neatly organize core transactional details, with columns designated for the R-Register, cash amounts, ledger folio numbers, and bank figures. This layout streamlines cash dealings, using a C in the relevant columns to flag any deposits or withdrawals. Similarly, a C appearing in paired accounts indicates a contra entry, necessitated by a balancing transfer between stores of money.

It is an insightful realization that a cheque simultaneously represents cash received yet lacks a correlating ledger folio posting, given its characterization as a contra transaction in the bank reconciliation. Though imposing no ledger impact, the cheque does trigger a behind-the-scenes offsetting entry to square the two affected accounts. Fundamentally, the double-entry system demands that for every debit recorded, an equal and opposite credit must also feature to stay in balance.


Q- What are the various types of cash books maintained in organizations?

Ans- Cash books come in several varieties to suit different business needs. The petty cash book tracks minor daily expenses like stationery and supplies through a rolling cash balance. It serves as an emergency fund for unforeseen small outlays. Next is the columnar cash book, also called the contra voucher book. It captures petty cash transactions in a double-entry format with offsetting credit and debit columns.

Larger firms use specialized cash books for efficient bookkeeping. The single-column cash book records all cash and bank transactions together in a single left-hand column. Meanwhile, the double-column cash book separates cash from bank entries into two adjacent columns for easier reconciliation. The triple-column cash book expands on this to individually track multiple bank accounts.

Q- What is the fundamental guideline for recording contra entries?

Ans- At its core, a contra entry requires that the credit and debit are posted to the same primary ledger account. This ensures the contra transaction canceling itself out has no net effect on the balance of that head. Further, as contra entries offset within a single account, they invariably involve the cash or bank accounts on the other side of the offsetting debit and credit.

Q- What are some examples of transactions typically recorded through contra entries?

Ans- Common scenarios where contra entries arise include correcting erroneous bookings, adjusting petty cash balances, and transferring funds between internal accounts. For instance, petty cash would be debited with an offsetting credit to the cash account when replenishing the imprest fund. Similarly, canceling a mistaken customer invoice debit involves crediting the same sales account. In each case, the contra impacts and cancels within the same ledger head.


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Updated on:
March 16, 2024