A transaction involving the transfer of funds between a company's own cash and bank accounts, recorded on both the debit and credit sides of the cash book.
A contra entry occurs when money moves between a business's own accounts — typically cash to bank (deposit) or bank to cash (withdrawal). It appears on both sides of the cash book, marked with 'C' to indicate it's a contra entry. Since no external party is involved and total assets don't change, contra entries don't affect the profit and loss statement. They only affect the composition of liquid assets. In double-entry bookkeeping, the same amount is debited and credited within the business's own accounts.
A business deposits ₹2,00,000 cash into its bank account. Cash Book Credit side: ₹2,00,000 (cash decreases). Cash Book Debit side: ₹2,00,000 (bank increases). Both entries are marked 'C' for contra.
Ensures accurate financial reporting and record-keeping
Helps maintain regulatory and tax compliance
Enables better-informed business decisions
Improves operational efficiency and cash flow management
They maintain accurate records of cash and bank balances. Without recording contra entries, your cash book would show inflated totals — the cash balance would be too high and bank balance too low (or vice versa).
No. Contra entries only transfer money between your own accounts (cash ↔ bank). No income is earned and no expense is incurred, so there is zero impact on the profit and loss statement.
A record of a financial transaction in the accounting system, showing the accounts affected, amounts debited and credited, date, and description.
An accounting system where every transaction is recorded in at least two accounts — a debit in one and a credit in another — ensuring the accounting equation always balances.
The process of comparing and matching a company's accounting records with its bank statement to identify and resolve any differences.
The master accounting record that contains all financial transactions of a business, organized by account.
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