In dual entry accounting system, a Contra Entry is an entry which is recorded to reverse or offset an entry on the other side of an account. If a debit entry is recorded in an account, contra entry will be recorded on the credit side and vice-versa.
Debit and credit aspects of a single transaction are entered in the same account, but in different columns. Each entry in this case is viewed as a contra entry of the other. Remember the word contra as “Against” or “Opposite”.
Examples of Contra Entry
1. Cash 50,000 withdrawn for official purpose from the bank. Journal entry for this transaction will be
|To Bank A/C||50,000|
In the above example, both entries, debit and credit, are a contra entry of each other, they both offset each other. The narration is not required for a contra entry and only a “C” is written in the left column which depicts that it is a contra entry.
2. Received a check from a debtor for 10,000 and deposited into bank the same day.
|To Debtor’s A/C||10,000|
The above amount is recorded in the bank column (debit) side of the double column cash book.
A contra entry is also used in the Inter company netting to offset receivable and payable between 2 different entities/subsidiaries of a company so that one final amount remains between them.