A contra entry is a cash-book transaction that moves money between your own cash and your own bank, so it is written on both sides of a two-column cash book at once — one side debited, the other credited. You pass one whenever cash is paid into the bank, drawn from the bank for office use, or transferred between two of the firm’s bank accounts.
That short answer hides a neat idea: because both halves of the transaction already live inside the cash book, the double entry is complete without touching any other ledger. If you want this foundation built properly rather than pieced together from videos, a structured ACCA Knowledge Level bookkeeping course walks you through the cash book line by line.
How does a contra entry actually work inside the cash book?
A two-column cash book has a cash column and a bank column on each side — the debit (receipts) side and the credit (payments) side. Most transactions touch only one column: a cash sale lands in the cash column on the debit side, a supplier paid by cheque lands in the bank column on the credit side. A contra entry is different because a single event touches both columns, and both of those columns sit in the same book.
Take the most common case: you deposit ₹10,000 of office cash into the bank. The money has not left the business and nothing has been earned or spent. All that changed is where the money sits. So the bank column goes up and the cash column goes down by the same amount, on opposite sides of the book.
One transaction, both sides of the cash book
| Debit (receipts) side | L.F. | Bank | Credit (payments) side | L.F. | Cash |
|---|---|---|---|---|---|
| To Cash A/c | C | ₹10,000 | By Bank A/c | C | ₹10,000 |
Both legs recorded in the same cash book; the letter C replaces a folio reference.
Notice the letter C in the ledger folio (L.F.) column on both sides. In a normal entry the L.F. column carries the page number of the ledger account where the other half of the double entry is posted. In a contra entry there is nothing to post — the cash book itself is acting as both the cash account and the bank account, so the double entry is already finished. The C is a signal to you and to any reviewer: “do not post this to a separate ledger; it is self-contained.” This is the single detail examiners most want to see, and it rests on the same debit-and-credit logic you meet in double-entry bookkeeping.
Larger businesses often use a three-column cash book, which adds a discount column alongside cash and bank. The contra rule does not change. A discount allowed to a customer or received from a supplier belongs to an outside party, so it is never a contra, while a cash-to-bank move is still marked C exactly as before. The extra column simply captures the small settlement discounts that pass through at the same time; it has no bearing on whether an entry is a contra.
One precondition is easy to forget: a contra entry can only appear in a cash book that has at least a cash column and a bank column — a two-column or three-column cash book. A single-column cash book records cash alone, so there is no second column for the money to move into, and a contra entry simply cannot arise there.
Which transactions count as a contra entry?
The test is strict and worth memorising: a transaction is a contra entry only when both the cash account and the bank account of the same business are affected by the one event. Nothing is earned, nothing is spent, and no outside party is involved — the firm is simply shifting its own money from one place to another. Three situations qualify.
Cash deposited into the bank
You take notes and coins from the office and pay them into the bank. Bank column up on the debit side, cash column down on the credit side. This is the textbook contra entry and the one in the table above.
Cash withdrawn from the bank for office use
You write a self cheque and draw ₹5,000 to keep in the office till for small payments. Cash column up on the debit side, bank column down on the credit side. The key words are “for office use” — the money stays inside the business.
Transfer between two of the firm’s own bank accounts
You move funds from your current account to a second bank account the business holds. Both are the firm’s money, so this too is a contra — recorded through the bank column on both sides if the cash book tracks each account, or as a bank-to-bank note where separate books are kept.
A contra entry never leaves the business
Money moves between the firm’s own cash and bank; total assets are unchanged.
Equally important is what is not a contra. Drawing cash from the bank for the owner’s personal use is not a contra — that reduces capital and needs a real posting to the drawings account. Paying a supplier by cheque, receiving a customer’s payment, or settling an expense all involve an outside party, so they are ordinary entries, not contras. The cleanest rule of thumb: if the money crosses the boundary of the business, it is not a contra; if it only moves within the business’s own cash and bank, it is.
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Explore the ACCA Knowledge Level course →How is a contra entry different from a normal journal entry?
Students often ask whether a contra entry needs a journal entry too. In practice, the contra is the entry — it is recorded straight in the cash book, not routed through the journal and then posted to the ledger. A normal journal entry, by contrast, records a transaction in the book of original entry and is then posted to two separate ledger accounts. The difference is not just procedure; it changes where the double entry is completed and how you later check it.
A worked contrast makes it concrete. Suppose you pay ₹20,000 of office cash into the bank and, on the same day, buy ₹8,000 of stationery by cheque. The deposit is a contra: both legs sit in the cash book and the L.F. column shows C on each side. The stationery purchase is not a contra: the bank column is credited in the cash book, but the matching debit goes to a separate stationery or expenses account, so it carries a real folio reference, not a C. Same cash book, same day — one entry stays self-contained, the other reaches out to the ledger.
| What you compare | Contra entry | Normal journal entry |
|---|---|---|
| Where it is recorded | Inside the cash book, both sides | Journal, then posted to the ledger |
| Accounts involved | Only cash and bank of the same firm | Any two accounts, often an outside party |
| Separate ledger posting | ✗ Not needed — marked C | ✓ Required |
| Effect on profit | None — no income or expense | Often changes profit |
| Effect on total assets | Unchanged — only the cash/bank mix shifts | May rise or fall |
The row that trips people up is “effect on profit.” Because a contra entry only reshuffles the firm’s own money, nothing has been earned and nothing has been spent, so it never reaches the profit and loss account. Total assets are untouched as well — one current asset rises while another falls by the same amount. The only thing that changes is how much of your money is in cash versus in the bank, which is exactly why these entries matter for liquidity but not for profit.
What are the most common contra-entry mistakes?
Most errors come from treating a within-the-business transfer as something larger, or from skipping the marking that makes a contra readable. Watch for these:
- Posting a contra to the ledger anyway. Writing the C but then also posting cash or bank to a separate ledger account double-counts the transaction and throws out the trial balance.
- Forgetting the C mark. Leaving the L.F. column blank makes a reviewer hunt for a ledger posting that does not exist. The C is not decoration; it is the instruction.
- Treating owner’s drawings as a contra. Cash drawn for personal use reduces capital and belongs in the drawings account — it is not a cash-to-bank shuffle.
- Recording a cheque receipt as a contra. A cheque received from a customer and banked involves an outside party; it is an ordinary receipt, not a contra.
- Trying to pass one in a single-column cash book. With no bank column, there is nowhere for the second leg to go. You need a two-column book first.
- Letting a contra confuse the reconciliation. Deposits in transit and cheques not yet cleared are a reconciliation matter, not a contra — keep them for the bank reconciliation statement.
Spotting these reliably is really a matter of knowing where each book fits in the system. If you are still mapping that out, our guide to the journal, ledger and subsidiary books shows how the cash book sits alongside the other books of account.
What should you do next?
Start by practising the three qualifying cases until you can write them without thinking: cash into bank, cash out of bank for office use, and transfers between the firm’s own accounts — each marked C on both sides. Then test yourself with the trap cases, because exams and real ledgers both love to slip a drawings or a cheque receipt into a list of contras. Once the cash book feels natural, the trial balance and the reconciliation become far easier, and the whole first stage of bookkeeping starts to hang together as one system rather than a set of disconnected rules.
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Start the ACCA Knowledge Level courseFrequently Asked Questions
What does the C stand for in a contra entry?
The C in the ledger folio column stands for “contra.” It tells you the transaction is self-contained within the cash book and must not be posted to a separate ledger account, because both the cash and bank sides of the double entry are already recorded in the same book.
Is a contra entry a debit or a credit?
It is both. A contra entry always has one leg debited and the other credited for the same amount, written on opposite sides of the cash book. For a cash deposit, the bank column is debited and the cash column credited; for a withdrawal for office use, the reverse.
Does a contra entry affect the trial balance or profit?
No. A contra entry only moves money between the firm’s own cash and bank, so it does not create income or expense and does not change profit. It also leaves total assets unchanged — only the split between cash and bank shifts, so the trial balance stays balanced.
Can you pass a contra entry in a single-column cash book?
No. A contra entry needs both a cash column and a bank column so the two legs can sit on opposite sides of the same book. A single-column cash book records only cash, so there is no second column for the transfer, and a contra cannot be recorded there.
How many contra entries can a cash book have?
There is no limit. A busy business may pass several contra entries a day as it tops up the office till, banks its daily takings, or shifts money between accounts. Each one is recorded the same way and marked C on both sides, and none of them affects profit, so the count of contras tells you about cash-handling habits rather than about how the business performed.
Is cash withdrawn for personal use a contra entry?
No. Cash drawn from the bank for the owner’s personal use reduces capital and is posted to the drawings account, so an outside interest — the owner — is involved. A contra only covers money that stays inside the business, such as cash drawn for office use.
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