Question

What is contra entry? How can you deal with this entry while preparing double column cash book?

Answer 1

Contra entries are those entries which take place between bank and cash. In this case when cash is deposit in bank and when cash is withdrawal for office use from the bank, both the entries are posted in easy book and Letter C is written in LF, Column so that these entries are not posted to the ledger account further.

When the number of bank transactions is large, it is convenient to have a separate amount column for bank transactions in the cash book itself instead of recording them in the journal.

This helps in getting information about the position of the bank account from time to time.Just like cash transactions, all payments into the bank are recorded on the left side and all withdrawals or payments through the bank are recorded on the right side. When cash is deposited in the bank or cash is withdraw from the bank, both the entries are recorded in the cash book.

This is so because both aspects of the transaction appear in the cash book itself. When cash is paid into the bank, the amount deposited is written on the left side in the bank column and at the same time, the same amount is entered on the right side in the cash column. The reverse entries are recorded when cash is withdrawn from the bank for use in the office. Against such entries the word C will be written in the LF Column.