If you’re new to accounting or have just started exploring tools like Tally, you might have come across the term “Contra Entry” and paused to ask — what is contra entry, and why is it even needed? Let’s break it down together in the most beginner-friendly way possible. Whether you’re a student, small business owner, or just someone trying to understand finance better, this blog will help you grasp the basics of contra entry — with examples and tips to use it efficiently in Tally.
What is Contra Entry in Accounting?
Before we jump into Tally or examples, let’s first understand the core idea. In simple terms, a contra entry is an accounting transaction where both the debit and credit affect cash or bank accounts only, without involving other types of accounts like sales, expenses, or income. So, when money is moved between your cash account and bank account, or between two bank accounts, that’s a contra entry.
Here’s how to spot it:
- It involves only Cash and Bank accounts.
- It doesn’t affect any profit or loss in your business.
- It’s used to record internal money movement, not income or expense.
Types of Contra Entry
Now that you know what is contra entry in accounting, let’s look at the different forms it takes. There are mainly four types of contra entries:
1. Cash to Bank
When you deposit cash into your bank account.
Example: You put ₹10,000 cash into your SBI account.
2. Bank to Cash
When you withdraw cash from your bank account.
Example: You take out ₹5,000 from your HDFC account for office petty cash.
3. Bank to Bank
When you transfer funds from one bank account to another.
Example: ₹20,000 is transferred from Axis Bank to ICICI Bank.
4. Cash to Cash
Though less common, if money is moved from one cash point to another within the business, it can be considered a contra transaction.
Example: Cash is moved from the store register to the office drawer.
These entries make sure that your books reflect accurate internal cash movement.
What is Contra Entry with Example?
Let’s put all this theory into a clear example.
Contra Entry Example:
Let’s say your business withdraws ₹8,000 from its bank account and adds it to the office cashbox.
The accounting entry would be:
| Date | Particulars | L.F. | Debit (₹) | Credit (₹) |
| 31/08/2025 | Cash A/c Dr. | 8,000 | ||
| To Bank A/c | 8,000 | |||
| (Being cash withdrawn from bank) |
Both the debit and credit here involve internal accounts. This makes it a contra entry.
What is Contra Entry in Tally?
If you’re using accounting software, you’ve probably wondered how to handle this practically. Tally is one of the most popular tools for accounting in India, and yes, contra entry in Tally is handled separately through a dedicated voucher type.
Here’s how you do it:
- Open Tally → Go to Accounting Vouchers (Gateway of Tally)
- Press F4 for Contra Voucher
- Select:
- Cash A/c if you’re adding or withdrawing cash.
- Bank A/c for deposit or transfer.
- Enter the amount and narration.
- Save the entry.
Pro Tip:
- Use ‘C’ in the ledger for cash and bank accounts to easily track contra entries.
- Always add a brief narration for clarity (e.g., “Transferred ₹10,000 from Cash to Axis Bank”).
This process ensures internal transactions don’t mess up your income or expense sheets.
Contra Entry in Tally with Example
Let’s walk through a real use case inside Tally.
Scenario:
You deposit ₹15,000 from office cash into your HDFC Bank account.
Tally Contra Entry:
| Ledger | Debit/Credit | Amount |
| HDFC Bank A/c | Debit | ₹15,000 |
| Cash A/c | Credit | ₹15,000 |
Narration: “Cash deposited into HDFC Bank account”
It’s clean, traceable, and doesn’t touch any sales or expense accounts. You can also verify this entry under Day Book for record-keeping.
Why Is It Important to Record Contra Entries?
It might feel like a simple internal shuffle of money, so why even record it?
Here’s why:
- It helps maintain accurate bank and cash balances.
- Provides a clear audit trail of all internal transactions.
- Keeps your books clean and compliant, especially for GST or taxation checks.
- Makes your financial statements more reliable for investors, auditors, and partners.
If ignored, it can cause imbalances between your cash in hand and bank statement, making reconciliations tricky.
Bonus Tip: How to Identify Contra Entries in Your Ledger
Want a quick way to find them later? In many manual or digital accounting books, ‘C’ is written in the L.F. (Ledger Folio) column to mark contra entries. It’s a simple but effective way to separate them from sales or purchase entries.
Just like you now understand what is contra entry and how to use it with real-world examples, NutBolt India continues to make confusing terms simple. Whether it’s education, lifestyle, finance, or career queries — NutBolt India is where curiosity meets clarity.
Final Thoughts
To wrap it up, a contra entry is all about internal money movement, between your cash and bank accounts. It doesn’t involve income, expense, or third-party transactions. Now that you know what is contra entry with example, keep practicing and explore how they appear in your own financial systems. Over time, it’ll become second nature!
