Question

What is the purpose of contra entry?

Answer 1

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⏩The purpose of contra entry is to indicate the transactions that effect both cash and bank balances. This entry does not affect the financial positions of a business. A contra entry is recorded in both sides of a two column Cash Book and is denoted by 'C' in the ledger folio column.

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Answer 2

Purpose of contra entry

An entry which affects both cash and bank accounts is called a contra entry. The term 'contra' in Latin means the opposite. The debit and credit aspects of the transaction are recorded in the cash book itself in contra entries.

Example:

Cash paid to bank

                     Bank a/c                   Dr. XXX

                                 To cash a/c                              XXX

(Cash paid into the bank)

This is a contra entry. As the cash book with cash and bank columns is a combined cash and bank account, both the aspects of the transaction will be entered in the same book.

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What is contra entry ?

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