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Contra Entry Cashbook: Meaning, Types & Examples
In accounting, a Contra Entry Cashbook is a unique transaction recorded in the Three-Column Cash Book to reflect the internal transfer of funds between Cash and Bank accounts of the same business entity.
The term “Contra” signifies “opposite,” as the entry affects both columns on opposite sides — when cash is deposited into the bank, the Bank column is debited and Cash column is credited; conversely, when cash is withdrawn from the bank for office use, Cash is debited and Bank is credited.
Marked with “C” in the Ledger Folio (L.F.) column on both sides, it requires no separate journal or ledger posting. It is self-balancing, maintaining the total of cash and bank unchanged.
Contra entries ensure accurate tracking of liquid funds, support bank reconciliation, and prevent misclassification of internal movements as expenses or income. Essential in practical bookkeeping, they streamline financial control and transparency.
What Is Contra Entry In Accounting?
A Contra Entry cashbook is a special accounting entry that records the transfer of funds between two accounts that are part of the same business, typically Cash and Bank, in the Cash Book.
It is entered twice — on opposite sides of the same book (Cash Book) — and marked with “C” (for Contra) in the L.F. (Ledger Folio) column.
What Is Contra Entry In Cashbook?
A Contra Entry Cashbook records internal transfer of funds between Cash and Bank in the same business. It appears twice in the Three-Column Cash Book — once in Cash column, once in Bank column — on opposite sides, marked with “C” in L.F. column.
- Cash to Bank: Debit Bank, Credit Cash
- Bank to Cash: Debit Cash, Credit Bank
No separate journal or ledger entry needed. Self-balancing; total cash + bank unchanged. Used only for internal movements, not expenses/payments. Helps in bank reconciliation.
Example: ₹10,000 cash deposited → Dr. Bank ₹10,000 (To Cash C), Cr. Cash ₹10,000 (By Bank C).
Key: “C” in L.F. on both sides → No profit/loss impact.
Types Of Contra Entry
A contra entry is a journal entry in accounting that records a transaction involving the transfer of funds between two accounts where both the debit and credit sides belong to the same category (typically cash or bank). It appears on both sides of the three-column cash book (or bank book) and is marked with a “C” in the ledger folio column to indicate it’s a contra transaction.
Contra entries are primarily used in the Cash Book to avoid unnecessary postings to the ledger for internal transfers.
| Types | Description | Example |
| Deposited cash Into Bank | Cash withdrawn from the cash till is deposited into the bank account. | Cash → Bank |
| Cash Withdrawn From Bank For Use | Money is withdrawn from the bank (via cheque or ATM) for business cash expenses. | Bank → Cash |
| Transfer Between Bank Accounts | Funds are transferred from one bank account to another (e.g., from savings to current account). | Bank A → Bank B |
Journal Entries In Cashbook
- Cash Deposited Into Bank
Cash A/c ————————- Dr Rs 10,000
To Bank A/c—————————— Cr Rs 10,000
(Being cash deposited into bank)
- Cash Withdrawn From Bank
Bank A/c —————————————– Dr Rs 5000
To Cash A/c——————————————–Cr Rs 5000
(Being Cash withdrawn from Bank for office use)
3.Transfer Between Two Bank Accounts
Bank (Current) A/c—————————————Dr 20,000
To Bank (Savings) A/c—————————————-Cr 20,000
(Being the amount transferred from savings to the current a/c)
What Is The Purpose Of Contra Entry?
To accurately record internal transfers of funds between cash and bank accounts (or vice versa) in the double-entry system, ensuring transparency, preventing errors, and facilitating reconciliation—without altering the overall financial position of the business.
1. Accurate Tracking Of Internal Movement
Businesses often move money between cash (petty cash or physical currency) and bank accounts for operational needs:
- Depositing surplus cash into the bank.
- Withdrawing cash from the bank for daily expenses.
Without proper recording, such movements could lead to discrepancies between physical cash and recorded balances. A contra entry ensures both accounts are updated simultaneously and correctly.
2. Prevention Of Double Counting & Omission
If a deposit into the bank is recorded only as a credit to cash, but not as a debit to bank, the bank balance will be understated. Similarly, if only one side is recorded, it violates the double-entry principle. Contra entry forces dual recording, ensuring completeness.
3. Facilitation Of Bank & Cash Reconciliation
At the end of a period, businesses reconcile:
- Cash book with physical cash count.
- Bank column with bank statement.
Contra entries provide a clear audit trail of all transfers, making it easier to trace discrepancies (e.g., delays in cheque clearance or unrecorded withdrawals).
4. Maintaining Integrity Of The Accounting Equation
Since both sides of the transaction involve assets (cash and bank), the total asset value remains unchanged: Contra entry Cashbook can make the process of bookkeeping more effective and lucid.
5. Compliance With Double Entry Principle
Even internal transfers must follow the rule: “Every debit must have a corresponding credit.” Contra entry satisfies this without involving external parties. The double-entry principle makes the process of Contra entry Cashbook more effective.
Contra Entry Journal Entry
To accurately record internal transfers of funds between cash and bank accounts (or vice versa) in the double-entry system, ensuring transparency, preventing errors, and facilitating reconciliation, without altering the overall financial position of the business.
1. Accurate Tracking Of Internal Fund Management
Businesses often move money between cash (petty cash or physical currency) and bank accounts for operational needs:
- Depositing surplus cash into the bank.
- Withdrawing cash from the bank for daily expenses.
Without proper recording, such movements could lead to discrepancies between physical cash and recorded balances. A contra entry ensures both accounts are updated simultaneously and correctly.
2. Prevention Of Double Counting & Omission
If a deposit into the bank is recorded only as a credit to cash, but not as a debit to the bank, the bank balance will be understated. Similarly, if only one side is recorded, it violates the double-entry principle. Contra entry forces dual recording, ensuring completeness.
3. Facilitation Of Bank & Cash Reconciliation
At the end of a period, businesses reconcile:
- Cash book with physical cash count.
- Bank column with bank statement.
Contra entries provide a clear audit trail of all transfers, making it easier to trace discrepancies (e.g., delays in cheque clearance or unrecorded withdrawals).
4. Maintaining Integrity Of The Accounting Equation
Since both sides of the transaction involve assets (cash and bank), the total asset value remains unchanged: Contra entry in the Cashbook can help your business to grow in perfect order within a shorter period of time.
5. Compliance With Double Entry Principles
Even internal transfers must follow the rule: “Every debit must have a corresponding credit.” Contra entry satisfies this without involving external parties.
How To Enter A Contra Entry?
Below is a step-by-step guide to enter a contra entry in the Three-Column Cash Book (with Cash, Bank, and Discount columns).
1. Identify The Transaction
Only internal transfers between Cash and Bank are contra entries.
Examples:
- Cash deposited into the bank
- Cash withdrawn from the bank for office use
2. Decide Debit And Credit
Transaction Debit Side Credit Side
Cash deposited into Bank Bank Cash
Cash Withdrawn From Bank For Use Cash bank
3. Write The Entry On Both Sides
Format
| Date | Particulars | L.F. | Cash | Bank | Date | Particulars | L.F | Cash | Bank |
4. Fill The Entry
Example 1: Deposit Cash into Bank
Date: 06-Nov-2025
Amount: ₹15,000 cash deposited into the bank
| Date | Particulars | L.F. | Cash | Bank | Date | Particulars | L.F. | Cash | Bank |
| 2025-11-06 | Cash | 2025-11-06 | Bank | C | 15000 | ||||
| To cash | C | 15000 | |||||||
Example 2: Withdraw cash From the bank
Amount:- Rs 8000 withdrawn from the bank for office use
Date:- 7th Nov 2025
| Date | Particulars | L.F | Cash | Bank | Date | Particulars | LF | Cash | Bank |
| 7-11-2025 | Bank | C | 8000 | 2025-11-07 | Cash | C | 8000 | ||
5. Key Rules To Follow
Rule Description
- Only between Cash and Bank
- Same amount on both sides
- “C” in L.F. column on both debit and credit sides
- No ledger posting needed (self-balancing)
- Write the opposite account name (e.g., “Cash” on debit → “Bank” on credit)
FAQ(Frequently Asked Questions)
1. What is a contra entry in the cash book?
Ans: A contra entry records the transfer of funds between cash and bank within the same business. It appears on both sides of the three-column cash book with “C” in the L.F. column.
2. When do we record a contra entry?
Ans: Only for internal transfers:
- Cash deposited into bank
- Cash withdrawn from bank for office use
3. How to identify a contra entry in the cash book?
Ans: Look for:
- Same amount on debit and credit sides
- “C” in L.F. column on both sides
- Only Cash and Bank columns are used
4. Do we post contra entries to the ledger?
Ans: No. Contra entries are self-balancing and not posted to any ledger account.
5. What is the effect of a contra entry on total cash + bank balance?
Ans: No change. The total (Cash + Bank) remains the same — only the distribution between cash and bank shifts.
Final Takeaway
Hence, if you want to grow your business in the correct direction then the application of Contra entry in Cashbook holds the key. It can help you to boost the scope of your record keeping in perfect order.
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