Question
What is the purpose of contra entry?

Answer

Contra entry represents deposits or withdrawals of cash from bank or vice versa. The purpose of contra entry is to indicate the transactions that effect both cash and bank balances. This entry does not affect the financial positions of a business. A contra entry is recorded in both sides of a two column Cash Book and is denoted by ‘C’ in the ledger folio column.

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Similar questions

How is accounting influenced by personal judgements?
Enter the following transaction in the Journal of Marutinandan Stores:
2017
 
Jan. 10
Purchased goods from Ghanshyam of the list price of 50,000 at 15% trade discount.
Jan. 13
Returned goods to Ghanshyam of the list price of ₹ 2,000
Jan. 15
Paid cash to Ghanshyam ₹ 40,000 in full settlement of his account.
Jan. 20
Purchased goods from Raghu of the list price of ₹ 60,000 at 10% trade discount.
Jan. 22
Returned goods to Raghu of the list price of ₹ 5,000
Jan. 25
Paid cash to Raghu ₹ 49,000 in full settlement of his Account.
Use Accounting Equation to show the effect of the following transactions of M/s Royal Traders:
 
 
(₹)
(a)
Started Business with Cash
1,20,000
(b)
Purchased goods for cash
10,000
(c)
Rent received
5,000
(d)
Salary outstanding
2,000
(e)
Received interest
700
(f)
Sold goods for cash (costing ₹ 5,000)
7,000
(g)
Goods destroyed by fire
500
Prepare an Accounting Equation on the basis of the following transaction:
  1. Started business with cash ₹ 70,000.
  2. Credit purchase of goods ₹ 18,000.
  3. Payment made to creditors in full settlement ₹ 17,500.
  4. Purchase of machinery for cash ₹ 20,000.
  5. Depreciation on machinery ₹ 2,000.
Is it possible to pass a single journal entry for two or more transactions?
What is meant by Rectification of Errors? State its objectives.
Raja Ltd. purchased securities for ₹ 50 lakh. At the end of the year, the market value of such securities was ₹ 40 lakh. While preparing the financial statements, the company valued the securities at cost i.e. at ₹ 50 lakh. Is it a correct treatment?
Show the accounting equation on the basis of following transactions:
  1. Ram started business with ₹ 25,000.
  2. Purchased goods from Shyam ₹ 10,000.
  3. Sold goods to Sohan costing ₹ 1,500 for ₹ 1,800.
What do you understand by balancing of account?
Prepare a Compound Entry with the help of imaginary figures and show its posting.