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A contra entry occurs when one business both buys goods from, and sells goods to, one other business.
Rather than making a payment for the full amount owed, and receiving a payment for the full amount due, only the difference between the two amounts actually exchanges hands; this is known as contra accounting.
The contra entry is shown as follows:
The first business has a debit entry in the sales ledger and a credit entry in the purchases ledger to the second business.
The smaller of the two accounts (the debtor account and the creditor account of the same trader) is taken and posted to the opposite side of each respective amount, so that there is a credit entry in the sales ledger and a debit entry in the purchases ledger.
(The amount posted to both accounts is actually the contra.)
This will effectively close the account with the smaller amount leaving the trader either a debtor or a creditor to the other business.
The amount that the trader either still owes or is owed is the larger of the accounts minus the smaller transferred amount. It can happen, in very rare cases, that a contra closes both the credit and the debit account if both the amount owed and the amount owing are exactly the same size.
What else can I help you with?
What is a double entry account?
Contra entry
Does the returns inwards affect the debtors control account in the general ledger?
Yes, returns inwards affect the debtors control account in the general ledger. When goods are returned by customers, it results in a reduction of accounts receivable, which is reflected in the debtors control account. This decrease is typically recorded as a debit entry to the returns inwards account and a corresponding credit entry to the debtors control account, thereby adjusting the total amount owed by customers.
The Item column of the ledger account for the opening first entry for the ledger accounts?
The first opening entry of a ledger is the correctly dated total or balance. It is from that amount in which all other numbers are credited and debited.
What is the general ledger journal entry to write off accounts payable checks?
If you've made a payment on the vendor account which was previously incurred the entry would be: Debit: Accounts Payable; Credit: Cash If you're trying to write-off an unpaid accounts payable the entry would be: Debit: Accounts Payable; Credit: Expense Settlement Account (Contra-Expense account on the P&L that will flow through to Retained Earnings.
What effect does an entry on the debit side of a ledger account will where applicable have an effect of?
An entry on the debit side of a ledger account typically signifies an increase in assets or expenses, or a decrease in liabilities or equity. For example, debiting an asset account increases its balance, while debiting an expense account reflects incurred costs. Conversely, in liability accounts, a debit entry reduces the overall balance. Thus, the effect of a debit entry varies depending on the nature of the account involved.
What is contra entry systam?
an entry made in the opposite side of an account to offset an earlier entry, for example, a debit against a credit
What is a double entry account?
Contra entry
Does the returns inwards affect the debtors control account in the general ledger?
Yes, returns inwards affect the debtors control account in the general ledger. When goods are returned by customers, it results in a reduction of accounts receivable, which is reflected in the debtors control account. This decrease is typically recorded as a debit entry to the returns inwards account and a corresponding credit entry to the debtors control account, thereby adjusting the total amount owed by customers.
Is a control account part of the double entry system?
Yes. The balancing entry is passed in the self balancing ledger.For e.g. an increase in debtors due to sales will have the following entry passed- Debtors Ledger Adjustment a/c[In the general ledger] dr. To Sales a/c General Ledger Adjustment a/c[In the Debtors Ledger] dr. To Debtors Ledger Adjustment a/c[In The general Ledger]
The Item column of the ledger account for the opening first entry for the ledger accounts?
The first opening entry of a ledger is the correctly dated total or balance. It is from that amount in which all other numbers are credited and debited.
What is the general journal entry for cash deposit?
Cash deposit to bank has contra entry as follows: [Debit] Bank account [Credit] Cash account
What is the general ledger journal entry to write off accounts payable checks?
If you've made a payment on the vendor account which was previously incurred the entry would be: Debit: Accounts Payable; Credit: Cash If you're trying to write-off an unpaid accounts payable the entry would be: Debit: Accounts Payable; Credit: Expense Settlement Account (Contra-Expense account on the P&L that will flow through to Retained Earnings.
What is contra entry?
an entry made in the opposite side of an account to offset an earlier entry, for example, a debit against a credit
What effect does an entry on the debit side of a ledger account will where applicable have an effect of?
An entry on the debit side of a ledger account typically signifies an increase in assets or expenses, or a decrease in liabilities or equity. For example, debiting an asset account increases its balance, while debiting an expense account reflects incurred costs. Conversely, in liability accounts, a debit entry reduces the overall balance. Thus, the effect of a debit entry varies depending on the nature of the account involved.
If you debit an account is it decrease or increase?
increase By debiting an account means,specific amount will be deducted for credit to the account for whom it is intended, which is contra entry by nature.
What does dda gl credit mean?
DDA=Demand Deposit Account....(ex, checking account, savings account, etc) GL=General Ledger.... Credit=Positive Entry, Entry going -in-, opposite of debit....
What is the general ledger journal entry to begin a Reserve Account?
debit reserve accountcredit cash / bank
