Contra entry is one of the most commonly used accounting transactions in Tally Prime. It is used whenever money is transferred between cash and bank accounts or between two bank accounts. Since both sides of the transaction involve cash or bank accounts, these transactions are recorded using a Contra Voucher.
Every business regularly performs activities such as depositing cash into a bank, withdrawing cash from a bank, or transferring funds between bank accounts. Proper recording of these transactions ensures accurate cash balances, bank balances, and financial reporting.
What Is a Contra Entry?
A contra entry is an accounting transaction that involves the movement of funds between cash and bank accounts or between two bank accounts belonging to the same business.
Examples include:
- Cash deposited into a bank
- Cash withdrawn from a bank
- Transfer between bank accounts
- ATM cash withdrawal
- Online transfer between company bank accounts
These transactions do not affect income or expenses. They simply move funds from one account to another.
Why Is Contra Entry Important?
Contra entries help businesses:
- Maintain accurate cash balances
- Track bank transactions
- Monitor fund transfers
- Simplify bank reconciliation
- Maintain proper accounting records
Incorrect contra entries can create mismatches between cash books and bank statements.
When Should You Use a Contra Voucher?
A Contra Voucher should be used whenever:
- Cash is deposited into a bank account
- Cash is withdrawn from a bank account
- Money is transferred between two bank accounts
No customer, supplier, income, or expense account is involved in a contra transaction.
Steps to Record Contra Entry in Tally Prime
Step 1: Open Tally Prime
Launch Tally Prime and select the required company.
Step 2: Open Contra Voucher
From the Gateway of Tally, open:
Vouchers
or press:
F4 – Contra Voucher
The Contra Voucher screen will appear.
Step 3: Select the Account
Choose the account from which money is moving.
Examples:
- Cash Account
- SBI Bank
- HDFC Bank
Step 4: Select the Receiving Account
Choose the account receiving the funds.
Examples:
- Cash Account
- ICICI Bank
- Axis Bank
Step 5: Enter Amount
Enter the amount being transferred.
Verify the amount carefully before saving.
Step 6: Add Narration
Enter a description of the transaction.
Example:
“Cash deposited into SBI Bank.”
Proper narration helps during future audits and reviews.
Step 7: Save the Voucher
Press:
Ctrl + A
to save the transaction.
The contra entry is now recorded successfully.
Example 1: Cash Deposited into Bank
Suppose a business deposits ₹50,000 cash into its bank account.
Entry:
- SBI Bank Account – Debit ₹50,000
- Cash Account – Credit ₹50,000
This increases the bank balance and decreases the cash balance.
Example 2: Cash Withdrawn from Bank
Suppose a business withdraws ₹20,000 from its bank account for office use.
Entry:
- Cash Account – Debit ₹20,000
- SBI Bank Account – Credit ₹20,000
This increases cash and decreases the bank balance.
Example 3: Bank-to-Bank Transfer
Suppose ₹1,00,000 is transferred from SBI Bank to HDFC Bank.
Entry:
- HDFC Bank Account – Debit ₹1,00,000
- SBI Bank Account – Credit ₹1,00,000
This updates both bank accounts accurately.
Contra Entry Through ATM Withdrawal
Businesses often withdraw cash through ATMs.
Example:
ATM withdrawal of ₹10,000.
Entry:
- Cash Account – Debit ₹10,000
- Bank Account – Credit ₹10,000
This transaction can also be recorded using a Contra Voucher.
Reports Affected by Contra Entries
Contra transactions automatically update:
- Cash Book
- Bank Book
- Ledger Reports
- Trial Balance
- Cash Flow Reports
This ensures accurate real-time financial information.
Common Mistakes During Contra Entry
Wrong Bank Selection
Selecting the wrong bank account creates reconciliation issues.
Incorrect Amount
Wrong transfer amounts affect cash and bank balances.
Missing Narration
Incomplete details make future tracking difficult.
Using Wrong Voucher Type
Some users mistakenly use Payment or Receipt Vouchers instead of Contra Vouchers.
Always use the correct voucher for fund transfers.
Benefits of Using Contra Voucher
Better Cash Management
Businesses can track cash movement accurately.
Accurate Bank Records
Bank balances remain updated.
Easier Reconciliation
Bank statements become easier to reconcile.
Improved Financial Reporting
Reports remain accurate and reliable.
Better Internal Control
Businesses can monitor fund transfers effectively.
These advantages improve overall financial management.
Best Practices for Contra Entries
Follow these recommendations:
- Verify transfer amounts carefully
- Select correct bank accounts
- Maintain proper narration
- Reconcile bank accounts regularly
- Review cash balances periodically
These practices improve accounting accuracy and reduce errors.
Difference Between Contra Entry and Payment Entry
Many beginners confuse contra entries with payment entries.
Contra Entry
Used for:
- Cash to Bank
- Bank to Cash
- Bank to Bank
Payment Entry
Used for:
- Expenses
- Supplier payments
- Tax payments
- Salary payments
Understanding this difference helps avoid accounting mistakes.
Conclusion
Contra entries are essential for recording fund transfers between cash and bank accounts or between multiple bank accounts. By using the Contra Voucher in Tally Prime, businesses can maintain accurate cash balances, bank balances, and financial records. Proper contra entry recording improves financial control, simplifies bank reconciliation, and supports reliable financial reporting.
