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Contra Entries

Transactions recorded in three column cash book which relates to both cash and bank account (i.e. balance of one will decrease and other will increase), such transactions are entered on both sides of the cash book and are known as Contra Entry. These types of entries require no further posting in any other account. Such entries are marked in the cash book with the letter “C” in the folio column to indicate that these are contra transactions and no further posting is required for them.

Contra Entries are Passed when

  • Cash is deposited into a bank by office: It is a payment by cash and receipt in bank. Therefore, it is to be entered on the credit side of the cash book, in the cash column as “By Bank” and on debit side in the bank column as “To Cash”. The reason for making two entries is to comply with the principle of double entry. Writing “C” in the folio column indicates that no further posting of these transactions is necessary.
  • Cheque drawn for office use: It is payment by bank and receipt in cash. Therefore, it is to entered on the debit side, in the cash column as “To Bank” and on the credit side, in the bank column as “By Cash”

Note: If initially, cheques received are entered in the cash column and then sent to the bank, the entry is as if cash has been sent to the bank. It is a contra entry.


Illustration 3

Prepare a three column cash book of M/s. Roshan Production and Co. from the following particulars:

2012 Jan.

  1. Cash in hand ₹25,000, Bank Overdraft ₹10,000
  2. Paid into bank ₹5,000
  3. Bought goods from Dharma for ₹100 for cash
  4. Bought goods for ₹1,000, paid a cheque for them, discount allowed 1%
  5. Sold goods to ABC Production for cash ₹588
  6. Received a cheque from Bhanu to whom goods were sold for ₹400 Discount allowed 12.5%
  7. Bhanu’s cheque deposited into the bank
  8. Purchased an old typewriter for ₹100 and spent ₹ 25 on its repairs
  9. Bank notified that Bhanu’s cheque has been returned dishonoured and debited the account in respect of charges ₹ 5
  10. Received a money order for ₹ 13 from Deshnok
  11. Bhanu settled his account by means of a cheque for ₹ 410, ₹ 10 being for interest charged
  12. Withdrew from bank for ₹ 5,000
  13. Discounted a B/R for ₹ 500 at 1% through bank
  14. Honoured our own acceptance by cheque ₹ 2,500
  15. Withdrew for personal use ₹ 500
  16. Paid trade expenses ₹1,000
  17. Withdrew from bank for private expenses ₹750
  18. Purchased machinery from Eshwar for ₹ 2,500 and paid him by means of a bank draft purchased for ₹ 2,503
  19. Issued cheque to Fara for cash purchase of furniture ₹ 788
  20. Received a cheque for commission ₹ 250 from Akash Ltd. and deposited into bank
  21. Chandu, who owed ₹ 250, became bankrupt and paid us 50 paise per rupee.
  22. Received payment of a loan of ₹ 2,500 and deposited ₹ 1,500 out of it into bank
  23. Paid rent to landlord Ajit, by a cheque of ₹ 110
  24. Interest allowed by bank ₹15
  25. Half-yearly bank charges ₹ 25

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