1. Definition of a Contra Entry
A Contra Entry occurs when a financial transaction involves moving money between physical cash holdings and the business bank account. Because both sides of the transaction take place within the Cash Book, the entry does not affect any outside ledger accounts.
2. Double-Entry Mechanics within a Single Book
To record a contra entry, you must update both the Debit and Credit sides of the Cash Book at the same time:
Scenario A: Depositing Cash into the Bank
  • Analysis: Bank balance increases (Debit Bank); physical Cash balance decreases (Credit Cash).
  • Entry: Debit the Bank column and Credit the Cash column.

Scenario B: Withdrawing Cash from the Bank for Office Use
  • Analysis: Physical Cash balance increases (Debit Cash); Bank balance decreases (Credit Bank).
  • Entry: Debit the Cash column and Credit the Bank column.

3. Visual Ledger Ledger Ledger Posting Protocols
To show a transaction is a contra entry and does not need to be posted to an outside ledger, accountants write a capital letter “C” in the Reference (Folio) column on both sides of the ledger.
 
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