What Is Contra Entry in Bookkeeping? Definition and Examples Explained

Learn what a contra entry is in bookkeeping, how it works in cash books, and why it's essential for balanced accounting records.

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Contra entry is a bookkeeping term referring to a transaction that involves two accounts where one account is debited and another is credited. This is commonly used in a cash book to record transactions where cash is both received and paid out, ensuring that the accounting records remain balanced and accurate.

FAQs & Answers

  1. What is a contra entry in accounting? A contra entry is a transaction affecting two accounts within the same ledger, where one account is debited and the other credited, commonly used to record cash transfers to keep accounts balanced.
  2. How is a contra entry recorded in the cash book? In the cash book, a contra entry is recorded by making an entry on both the debit and credit sides, reflecting cash being both received and paid out between accounts.
  3. Why is contra entry important in bookkeeping? Contra entries ensure that cash inflows and outflows are accurately recorded, maintaining the balance and integrity of accounting records.

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