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Question
What is the purpose of contra entry?
Answer in Brief
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Solution
Contra entry represents deposits or withdrawals of cash from bank or vice versa.
The purpose of contra entry is to indicate the transactions that effect both cash and bank balances.
This entry does not affect the financial positions of a business.
A contra entry is recorded in both sides of a two-column Cash Book and is denoted by ‘C’ in the ledger folio column.
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