A contra entry is a transaction where both the debit and the credit are in the cash book, because money simply moves between the cash column and the bank column. The two common cases are cash paid into the bank and cash withdrawn from the bank.
This appears in cash book questions whenever takings are banked or the owner draws money from the bank for the till. It follows from distinguishing bank and cash movements.
Why is it called a contra?
“Contra” means against.
The debit sits on one side of the book and the credit sits opposite it, in a different column. The business is not richer or poorer. Only the place where the money sits has changed.
Each contra is written twice on the same date, marked with C in the folio column. The C tells you that no other ledger account needs posting.
How do you record each case?
| Transaction | Cash column | Bank column |
|---|---|---|
| Cash paid into the bank | Credit | Debit |
| Cash withdrawn from the bank | Debit | Credit |
A quick memory aid: the account that gains money takes the debit. When cash is banked, the bank gains. When cash is withdrawn, the till gains.
Worked example
Nusa Hardware starts the week with RM 150 cash and RM 1,000 in the bank.
- 8 June: cash sales RM 1,340.
- 9 June: banks RM 1,200 of the cash.
- 10 June: withdraws RM 300 from the bank for the till.
- 11 June: pays wages in cash RM 250.
Step 1, the sale. A cash receipt, debit in the cash column.
Step 2, banking the cash. Credit cash RM 1,200 and debit bank RM 1,200, both marked C.
Step 3, the withdrawal. Debit cash RM 300 and credit bank RM 300, both marked C.
Step 4, the wages. Credit cash RM 250.
| Side | Details | Cash | Bank |
|---|---|---|---|
| Dr | Balance b/d | 150 | 1,000 |
| Dr | Sales | 1,340 | |
| Dr | Cash banked (C) | 1,200 | |
| Dr | Bank withdrawal (C) | 300 | |
| Dr total | 1,790 | 2,200 | |
| Cr | Cash banked (C) | 1,200 | |
| Cr | Bank withdrawal (C) | 300 | |
| Cr | Wages | 250 | |
| Cr | Balance c/d | 340 | 1,900 |
| Cr total | 1,790 | 2,200 |
Check: cash is 1,200 + 250 + 340 = 1,790. Bank is 300 + 1,900 = 2,200. The two balances add to 340 + 1,900 = RM 2,240.
Second check: the business began with 150 + 1,000 = 1,150. It added sales of 1,340 and paid wages of 250, so 1,150 + 1,340 − 250 = 2,240. The contras did not change the total, which confirms they only moved money between columns.
The mistake to watch for
A frequent slip is to record banking the cash on one side only.
Mistaken entry: Bank debit 1,200, with nothing on the credit side of the cash column.
The bank balance rises but the cash column still shows the money in the till. The business has counted the same RM 1,200 twice, and the columns will not agree with a physical cash count.
The correction is to check that every contra has two lines: one debit and one credit, on the same date, in different columns.
Check yourself
1. A business banks RM 800 of its cash takings. Write the two entries.
Show answer
Debit bank RM 800 (bank column, debit side) and credit cash RM 800 (cash column, credit side). Both are marked C.
2. The owner withdraws RM 500 from the bank to put in the till. Which column is debited and which is credited?
Show answer
Cash column debited RM 500 and bank column credited RM 500. Money enters the till and leaves the bank.
3. Why is no ledger posting made for a contra entry?
Show answer
Because both the debit and the credit are already in the cash book, which is itself the cash and bank account. Posting again would record the same movement twice.
Where this leads next
Next, look at small everyday payments made from a separate float in restoring a petty-cash imprest. To see how the cash book connects to other accounts, try the double-entry and ledger trainer.
Our teachers can help you practise contra entries in mixed questions through online one-to-one Accounting tuition.