Contra Entry in Cash Book

In accounting, a Cash Book is a book in which all cash transactions are recorded. The Cash Book has two sides, namely, Debit and Credit. When two aspects of a transaction are posted on both sides of the Cash Book, such an entry is called a Contra Entry. Let's understand the Contra Entry in Cash Book in detail:

Meaning of Contra Entry

A Contra Entry is a transaction that involves both Cash and Bank accounts. In other words, it is a transaction that takes place between the Cash account and Bank account of the same entity. Since both accounts are maintained in the Cash Book, a Contra Entry is recorded on both sides of the Cash Book.

For example, if an entity withdraws money from the Bank and deposits it into the Cash account, it is a Contra Entry. Similarly, if an entity deposits money into the Bank from the Cash account, it is also a Contra Entry.

Recording Contra Entry in Cash Book

When a Contra Entry is recorded in the Cash Book, it is recorded on both the Debit and Credit sides of the Cash Book. The following steps are taken to record a Contra Entry in the Cash Book:

Step 1: Identify the transaction that involves both Cash and Bank accounts.

Step 2: Record the transaction on the Debit side of the Cash Book under the Bank column.

Step 3: Record the same transaction on the Credit side of the Cash Book under the Cash column.

Step 4: Write "By Bank" in the L.F. column on the Debit side of the Cash Book and "To Cash" in the L.F. column on the Credit side of the Cash Book.

Step 5: Calculate the total of both the Debit and Credit columns and ensure that they balance.

Conclusion

Thus, a Contra Entry is a transaction that involves both Cash and Bank accounts of the same entity. When such a transaction is recorded in the Cash Book, it is recorded on both the Debit and Credit sides of the Cash Book. Contra Entry is an important concept in accounting and is often tested in exams like CA Foundation.