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Question
Brifly explain about contra entry with examples.
Answer in Brief
Solution
- When the two accounts involved in a transaction are cash account and bank account, then both the aspects are entered in the cash book itself. As both the debit and credit aspects of a transaction are recorded in the cash book, such entries are called contra entries.
Examples-
- When cash is paid into a bank, it is recorded in the bank column on the debit side and in the cash column on the credit side of the cash book.
- When cash is drawn from the bank for office use, it is entered in the cash column on the debit side and in the bank column on the credit side of the cash book.
- To denote that there are contra entries, the alphabet ‘C is written in the L.F. column on both sides.
- Contra means that a particular entry is posted on the other side (contra) of the same book because the Cash account and Bank account are there in the cash book only and there are no separate ledger accounts needed for this purpose,
- The alphabet ‘C’ indicates that no further posting is required and the relevant account is posted on the opposite side.
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Three Column Cash Book (Cash Book with Cash, Discount and Bank Column)
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Enter the following transactions in the three column cash book of Kalyana Sundaram.
| 2017 Jan. |
||
| 1 | Balance in hand | 42,500 |
| Balance at bank | 35,000 | |
| 3 | Received for cash sales | 15,700 |
| 4 | Cash paid into bank | 11,500 |
| 6 | Cash purchases | 14,300 |
| 9 | Received dividend directly by the bank through ECS | 2,000 |
| 10 | Pongal advance to staff paid through bank | 17,000 |
| 12 | Received cash from Nagarajan | 11,850 |
| and allowed him discount | 150 | |
| 17 | Paid Magesh in full settlement of his account ` 20,000 | 19,700 |
| 20 | Cash withdrawn for personal expenses | 20,000 |
| 30 | Withdrawn cash from ATM for office use | 1,500 |
Record the following transactions in the three column cash book of John.
| 2017 Dec. |
₹ | |
| 1 | Cash balance brought forward | 12,600 |
| 1 | Bank overdraft brought forward | 36,000 |
| 1 | Advance paid to petty cashier by cheque | 3,000 |
| 5 | Goods sold for cash | 12,000 |
| 7 | Dividend on shares collected by the banker | 1,000 |
| 13 | Cash paid into Bank | 10,000 |
| 14 | Interest charged by the bank for bank overdraft | 1,500 |
| 18 | Cheque issued to Siddique | 8,000 |
| Discount received from him | 200 | |
| 24 | Insurance claim received by cheque and deposited into bank | 17,000 |
| 28 | Cash received from Baskar | 15,000 |
| Discount allowed to him | 150 | |
| 31 | Deposited into Bank all cash excess of ₹ 18,600 |
Prepare a triple column cash book of Rahim from the following transactions:
| 2017 Feb. |
||
| 1 | Cash in hand | 25,000 |
| Cash at bank | 10,000 | |
| 5 | Water purifier purchased for office use by cheque | 8,000 |
| 6 | Purchased goods for cash | 9,000 |
| 8 | Received cash from Daniel | 9,900 |
| Discount allowed to him | 100 | |
| 10 | Cheque received for goods sold and deposited in the bank | 40,000 |
| 12 | Paid to Amala by cheque | 14,500 |
| Discount received from her | 500 | |
| 13 | Paid transport charges by cash | 5,000 |
| 14 | Withdrawn cash from bank for office use | 20,000 |
| 24 | Cheque received from Kumar and deposited into the bank | 15,000 |
| 28 | Kumar’s cheque dishonoured |
What is three column cash book?
