What is Contra Entry in Accounting? Examples and Format

Contra entry records cash and/or bank account transactions in the accounting journal. This entry’s treatment does not affect the financial statement line item balance. Contra entry affects the debit and credit of cash and cash equivalent. This transaction involves cash, petty cash, banks, and other accounts under cash. If you have to transfer cash from your bank to petty cash, your accountant must prepare contra entry.

Your company may have more than one bank account, so multiple chart accounts must be set up. When you transfer cash from one account to another is also known as contra entry, which relates to the following accounts:

  • Petty cash
  • Cash at bank
  • Cash on hand

Contra entry, in addition to the above, refers to the offset between 2 separate companies’ accounts receivable (AR) and accounts payable (AP). Note that this type of contra entry involves only AR and PR.

Both companies need to have it recorded to ensure that their remaining balance is reconciled.

What is The Purpose of Contra?

Contra entry is about deposits and withdrawals from banks and the other way around. The purpose of contra entry is to show the transactions that impact cash and bank balances. This entry does not affect the financial positions of a business. A contra entry is recorded on both sides of a 2-column cash book and has a “C” sign on the ledger folio column.

What Rules Are Followed for a Contra Entry?

In the dual entry accounting system, the contra entry reverses or offsets an entry on the other side of an account. The debit entry in an account should be recorded on the credit side and reversed. A transaction’s debit and credit features are entered in one and the same account but in different columns. Thus, one entry is considered a contra entry of the other.

Contra Entry Examples

Example 1:

Your business has to keep a petty cash balance to cover small expenses in the office, so it needs to refill and get it ready for next week’s or month’s expenses. You transfer cash at the bank to the petty cash balance, where you should debit petty cash and credit cash at the bank.

Account Debit Credit
Petty Cash xxxxx
Cash at Bank xxxxx


Example 2:

Cash deposit to the bank.  If you make a sale and collect a payment, you’ll have to deposit it to the bank. The entry for this is debit cash at the bank and credit cash on hand.

Account Debit Credit
Cash at bank xxxxx
Cash on hand xxxxx


Example 3: 

If your company has multiple bank accounts and you need to transfer cash from one bank to another

For any reason, this is how you enter the account.   Please note that only the bank balance is affected here.

Account Debit Credit
Cash at bank A xxxxx
Cash at bank B


Example 4:

Company A has $6,000 accounts receivable with Company B.  Then Company A buys goods on credit from Company B for $3,000. So, Company A has an AP with Company B for 3,000.  If you want to get off the AR and AP with Company B, the entry should be:

Account Debit Credit
Accounts Payable 3,000
Accounts Receivable 3,000

What is a Double Entry Cash Book and Its Format? 

A double entry cash book, also known as a double column cash book, is a cash book that has 2 columns on each side to record cash and bank transaction. Instead of having separate cash and bank accounts, a double entry cash book allows accountants to have the cash and bank accounts side by side. This method of recording transactions promotes convenience and allows readily seeing the overall balances.  Besides convenience, the other advantage of a double entry cash book over a single entry is cost- and time-effective.  You do not have to maintain separate cash and bank accounts.

Format of a Double Entry Cash Book.

The double-entry cash book is similar to a single-entry cash book, except that a double-entry cash book has an extra column added to both sides to record cash discounts.  Here is the format of a double-column cash book.

Cash Book
Dr (Receipts) Cr (Payments)
Date Description V.No. PR Discount Cash Date Description V.No. PR Discount Cash


Accounting tasks such as payroll, AP and AR, contra entry, or double entry cash book can be time-consuming and repetitive.  A lot of time and resources must be dedicated to accomplishing these functions.  Find that the responsibility of many routine accounting functions is a drain on your resources instead of being valuable assets to your company. You might consider working with an experienced, licensed, reputable accounting service provider such as Jaxa Auditors.

We can deliver a cost-effective, efficient, quality work product that suits your timeline and operational needs.

So, let us hear from you at your convenience.  Call us at 971 4 2207 355 or email us at jiby@jaxaauditors.com and tell us how we can help you with your accounting functions.


Related Services in Dubai

Accounting Services | Bookkeeping Services | Accounting Outsourcing Services | Forensic Accounting

Leave a Reply

Your email address will not be published. Required fields are marked *