Contra Entry
Cash-to-bank and bank-to-cash transfers — the contra voucher explained with Sunrise Retail scenarios and practice
Prerequisites: Module 9 — Accounts Only
Learning Objectives
By the end of this module, you will be able to:
- Define a contra entry and explain when it occurs
- Identify the two scenarios for contra entries
- Record contra entries correctly in Tally (F4)
- Explain why contra entries do not affect the P&L or overall Balance Sheet
What Is a Contra Entry?
The word "contra" comes from Latin, meaning "against" or "opposite."
In accounting, a contra entry is a transaction where both the debit and credit sides involve Cash or Bank accounts — and nothing else. Money is simply moving from one internal account to another internal account.
There are exactly two scenarios where contra entries occur:
| Scenario | Movement | Dr | Cr |
|---|---|---|---|
| Cash deposited into bank | Cash → Bank | Bank Account | Cash in Hand |
| Cash withdrawn from bank | Bank → Cash | Cash in Hand | Bank Account |
That's it. If any other account is involved (a supplier, a customer, an expense), it is NOT a contra entry — it's a payment or receipt.
Why It's Called "Contra"
The reason this gets its own special voucher type is historical — when bookkeepers maintained a Cash Book, deposits and withdrawals were recorded on both sides of the same book (one side for the cash column, one side for the bank column). These entries "cancelled each other" within the same book — hence "contra."
In double-entry terms, the transaction is between two accounts of the same class (both Cash-in-Hand and Bank Accounts are under the Current Assets group). This is unusual — most transactions involve accounts from different classes.
Key Properties of Contra Entries
- No external party is involved — It's an internal transfer within the business
- No income or expense — The P&L is completely unaffected
- No net change in total assets — One asset increases, another decreases by the same amount
- The accounting equation stays identical — Nothing changes externally
- In Tally, only Contra Voucher (F4) records these — Never use Payment or Receipt for cash/bank transfers
Why the last point matters: If you use a Payment Voucher to record cash deposited into bank, Tally treats it as "money going out of the business" — and your day reports will show a phantom outflow. Always use F4.
Contra Entry in Tally Prime
In the Contra Voucher:
- The account on top (or on the Cr side) is the source — the account being reduced
- The account on the bottom (or on the Dr side) is the destination — the account being increased
Tally only allows accounts under Bank Accounts or Cash-in-Hand groups in a Contra Voucher. If you try to add a Supplier or Expense ledger, Tally blocks it — a useful guard against mistakes.
Sunrise Retail — Case Study Application
💼 Sunrise Retail Pvt Ltd — Contra Entry Scenarios
Scenario 1 — April 2: Cash Deposited into Bank
Kiran Sharma takes ₹2,00,000 from the business cash box and deposits it into the SBI Current Account. The business has too much cash lying around — better to keep it in bank.
Accounting Analysis:
- Cash in Hand decreases → Credit Cash in Hand (Rule: Real account, goes out)
- SBI Bank Account increases → Debit SBI Current Account (Rule: Real account, comes in)
Journal Entry:
| Account | Dr (₹) | Cr (₹) |
|---|---|---|
| SBI Current Account | 2,00,000 | |
| To Cash in Hand | 2,00,000 | |
| (Cash deposited into SBI — contra) |
In Tally (F4 Contra Voucher):
Wait — why is SBI on the Cr side in the Tally entry screen?
In Tally's Contra Voucher display, the top field is the account you're "paying from" in a withdrawal, or "receiving into" in a deposit. Tally internally handles the Dr/Cr correctly based on the nature of each account. Just select the accounts and Tally does the Dr/Cr assignment.
Scenario 2 — April 16: Cash Withdrawn from Bank
Sunrise Retail needs ₹50,000 in cash for day-to-day petty expenses — electricity bills, courier charges, small vendor payments. Withdrawn from SBI.
Accounting Analysis:
- SBI Bank decreases → Credit SBI Current Account
- Cash in Hand increases → Debit Cash in Hand
Journal Entry:
| Account | Dr (₹) | Cr (₹) |
|---|---|---|
| Cash in Hand | 50,000 | |
| To SBI Current Account | 50,000 | |
| (Cash withdrawn for petty cash — contra) |
In Tally (F4 Contra Voucher):
Narration: Cash withdrawn from SBI for petty cash purposes
Effect on Balance Sheet
After both entries, let's check Sunrise Retail's Cash and Bank positions:
Before (April 1):
- Cash: ₹50,000
- SBI Bank: ₹8,00,000
- Total: ₹8,50,000
After April 2 deposit (₹2,00,000 cash → bank):
- Cash: ₹50,000 − ₹2,00,000 = − ₹1,50,000 ← impossible! Cash can't go negative
Wait — let me correct: Sunrise Retail had ₹50,000 cash. They cannot deposit ₹2,00,000 cash into bank if they only have ₹50,000. Let's adjust the scenario:
Corrected Scenario: Let's say Kiran deposits ₹40,000 (within available cash):
- Cash: ₹50,000 − ₹40,000 = ₹10,000
- SBI Bank: ₹8,00,000 + ₹40,000 = ₹8,40,000
- Total: ₹8,50,000 ← Same total! Net effect on total assets = zero.
After April 16 withdrawal (₹50,000 bank → cash):
- Cash: ₹10,000 + ₹50,000 = ₹60,000
- SBI Bank: ₹8,40,000 − ₹50,000 = ₹7,90,000
- Total: ₹8,50,000 ← Still the same!
This is the defining property of contra entries: the total asset value never changes.
5 Practice Contra Entry Scenarios
Record each of these as contra entries. State the Dr and Cr for each.
1. Sunrise Retail deposits ₹3,00,000 from cash box into SBI. 2. Withdraws ₹75,000 from SBI for weekly petty cash float. 3. Transfers ₹1,00,000 from SBI Current Account to SBI Fixed Deposit (treated as another bank account in Tally). 4. Deposits ₹1,20,000 cash collected from walk-in customers directly into SBI. 5. Withdraws ₹25,000 from SBI to replenish petty cash that got depleted.
Click to reveal solution
| # | Dr | Cr | Amount |
|---|---|---|---|
| 1 | SBI Current Account | Cash in Hand | ₹3,00,000 |
| 2 | Cash in Hand | SBI Current Account | ₹75,000 |
| 3 | SBI Fixed Deposit | SBI Current Account | ₹1,00,000 |
| 4 | SBI Current Account | Cash in Hand | ₹1,20,000 |
| 5 | Cash in Hand | SBI Current Account | ₹25,000 |
Pattern: Cash → Bank = Bank Dr, Cash Cr. Bank → Cash = Cash Dr, Bank Cr.
All 5 are Contra Vouchers (F4) in Tally. None affect P&L. None change the total of Cash + Bank balances by anything other than internal redistribution.
Common Mistakes to Avoid
| Mistake | Why It's Wrong | Correct Approach |
|---|---|---|
| Using Payment Voucher (F5) for bank deposit | Tally treats it as expense going out — inflates outflows | Use Contra (F4) |
| Using Receipt Voucher (F6) for cash withdrawal | Tally treats it as income — inflates inflows | Use Contra (F4) |
| Adding an expense account to a contra entry | Contra entries involve ONLY Cash/Bank | Create a separate Payment entry |
| Contra for cheque payment to supplier | Wrong — supplier is involved, not just cash/bank | Use Payment Voucher (F5) |
| Recording contra in Journal (F7) | Tally won't flag it, but reports will show it incorrectly | Use Contra (F4) |
Key Terms
| Term | Meaning |
|---|---|
| Contra Entry | Transaction where both Dr and Cr are Cash or Bank accounts |
| Contra Voucher (F4) | Tally's dedicated voucher for Cash-Bank transfers |
| Cash in Hand | Physical currency kept in the office cash box |
| Bank Account | Money in the business's bank current/savings account |
| Petty Cash | Small fund of cash kept for minor daily expenses |
| Internal Transfer | Movement of funds between accounts within the same business — no external party |
Module Summary
- A contra entry involves only Cash and Bank accounts — no external parties, no income/expense
- Two scenarios: Cash → Bank (deposit) and Bank → Cash (withdrawal)
- In Tally, always use Contra Voucher (F4) — never Payment or Receipt for these
- Contra entries have zero net effect on total assets, liabilities, capital, or profit
- Tally's Contra Voucher only accepts accounts under Bank Accounts or Cash-in-Hand groups — built-in protection
Quick Quiz
Test yourself before moving on:
- Sunrise Retail deposits the day's cash sales of ₹80,000 into SBI. The journal entry is:
- a) Dr Cash ₹80,000, Cr SBI ₹80,000
- b) Dr SBI ₹80,000, Cr Cash ₹80,000
- c) Dr Sales ₹80,000, Cr SBI ₹80,000
- d) Dr Cash ₹80,000, Cr Sales ₹80,000
Show answer
b) Dr SBI ₹80,000, Cr Cash ₹80,000 — Bank comes in, Cash goes out; both are Cash/Bank accounts so this is a contra.
- Which voucher type in Tally is used for contra entries?
- a) F5 — Payment
- b) F6 — Receipt
- c) F4 — Contra
- d) F7 — Journal
Show answer
c) F4 — Contra — dedicated voucher that only accepts Cash-in-Hand and Bank Account ledgers.
- After a contra entry (₹50,000 cash withdrawn from bank), the total of Cash + Bank balances will:
- a) Increase by ₹50,000
- b) Decrease by ₹50,000
- c) Remain the same
- d) Depend on the direction of transfer
Show answer
c) Remain the same — internal transfer only; one asset rises while another falls by the same amount.
- Sunrise Retail pays ₹35,400 rent by cheque. This is recorded using:
- a) Contra Voucher (F4) — money leaves bank
- b) Payment Voucher (F5)
- c) Journal Voucher (F7)
- d) Receipt Voucher (F6)
Show answer
b) Payment Voucher (F5) — an external party (landlord) is involved, so it is NOT a contra entry.
Next: Module 11 — Double Entry Practice — 20 worked journal entries from Sunrise Retail's April–May books, covering drawings, bad debts, discounts, and corrections, plus 10 self-test exercises.