CMA Foundation · Fundamentals of Financial and Cost Accounting · Cash Book, Bank Book, Petty Cash Book, Bank Reconciliation Statement
A contra entry in a double column cash book arises when:
A contra entry occurs when cash is deposited into the bank. Both the debit (bank column) and the credit (cash column) fall within the cash book itself, so no ledger posting is needed. Other options involve a personal account such as a customer or creditor.
- ACash is deposited into the bankCorrect
- BA cheque is received from a customer
- CCash is paid to a creditor
- DDiscount is allowed to a debtor
Explanation
A contra entry has both the debit and credit in the cash book itself, one in the cash column and one in the bank column. Depositing cash into the bank debits bank and credits cash. The other transactions involve a personal account outside the cash book.
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