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Thread: What are the implications of allocating a payment in one cash book to another cash book as a contra

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    What are the implications of allocating a payment in one cash book to another cash book as a contra

    What are the implications of allocating a payment in one cash book to another cash book as a contra (instead of using a transfer account)?

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    Quote Originally Posted by LouisaEls View Post
    What are the implications of allocating a payment in one cash book to another cash book as a contra (instead of using a transfer account)?
    Hi Louisa, Something that I find works best is:
    Set up another bank account for example "Transferring Account" .

    1. First Account - example 8410/000
    If this account transfers money to 8420 then allocate it to the Transferring Account - example 8430

    2. Second Account - example 8420/000
    This account will then receive that money from 8410. Also allocate this to 8430

    You will then see a credit from first account in 8430 and a debit from second account in 8410 - therefore the two contra each other out.

    The only reason why I stopped doing the transfers directly to another account is because it is easy to forget which account you used to do the transfer - the cash book print out also won't show the "receipt" in the second account. you will only see it in the ledger detail.

    Having a transferring account really helps to reconcile each month if there are a lot of transfers to and from bank accounts. It should effectively always be zero.

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