Contra Transfers

System
System Posts: 100,534 🤖 Admin 🤖
edited June 18 in AAT student discussion
Hi - can anybody explain contra transfers to me please, as I seem to have banked this bit of my course out!!!<BR><BR>Any help would be much appreciated!<BR><BR>Thanks<BR><BR>Sadi

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  • System
    System Posts: 100,534 🤖 Admin 🤖
    Contra Transfers

    Imagine that you have a customer in your sales (debtors) ledger who owes you £200. Imagine that you alos buy goods from this same firm so that there is an account for them in your purchase (creditors) ledger andthat you owe them £150. Rather than you pay them and them pay you the whole amounts due, wouldn't it be easier for them just to pay you £50. You would then have to do a contra entry for the £150. You would need to debit your purchase ledger control with the £150 (as if you had paid it) and credit your sales ledger control (as if you had received it).<BR><BR>Contra entries are ALWAYS Dr to the Purchase Ledger control and Cr. to the Sales Ledger control. <BR><BR>Does this help?<BR><BR>Graham Blott
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Contra Transfers

    Yes it does thanks, but call me stupid - but why a contra charge for £150? I don't get where the £150 came from, as I would have said it was £50 as it was the difference. I'm probably being stupid but could you explain?
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Contra Transfers

    Yes. You owe me £200 and I owe you £150. You simply pay me the £50 difference (Dr. my account and credit bank/cash) This leaves a balance of £150 on each account. Hence the contra entry is for £150 (Dr. my account and Cr. your account) to bring both accounts back to zero.<BR><BR>Graham Blott

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