Accounting glossary
Contra entry
A contra entry records money moving between your own cash and bank accounts, such as cash deposited into the bank, cash withdrawn, or a transfer from one bank account to another. It changes where the money is, not how much you have.
Why it matters to your business
For a shop that takes cash all day, the contra entry is the link between the till and the bank. If deposits are not recorded, the cash ledger grows without limit and the bank ledger never agrees with the statement. Recording each deposit on the day it is made is the simplest control you have over cash.
How it works
Both sides of a contra entry are cash or bank ledgers:
| Transaction | Debit | Credit |
|---|---|---|
| Cash deposited into bank | Bank | Cash |
| Cash withdrawn from bank | Cash | Bank |
| Transfer from one bank to another | Receiving bank | Paying bank |
| Cash moved from the counter to petty cash | Petty cash | Cash |
When you reconcile, each deposit and transfer appears in the bank statement and is matched with its contra entry. See bank reconciliation.
Common mistakes
- Recording a cash deposit as income, which counts the same sale twice.
- Leaving out transfers between your own bank accounts, so both accounts fail to reconcile.
- Mixing personal withdrawals with contra entries; money taken for yourself is drawings.
Questions about Contra entry
What is an example of a contra entry?
Depositing ₹50,000 of counter cash into your current account. The bank ledger is debited and the cash ledger is credited by ₹50,000. Your total money is unchanged.
Is a payment to a vendor a contra entry?
No. A contra entry has cash or bank on both sides. A payment to a vendor has the bank on one side and the vendor on the other, so it is a payment entry.
Does a contra entry affect profit?
No. It moves money between your own accounts, so neither income nor expense is touched. Any bank charge on the transfer is a separate expense entry.
Why record cash deposits at all?
Because otherwise your books show cash you no longer hold and a bank balance lower than the statement. Daily contra entries for deposits keep the cash book and the bank reconciliation right.
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