Contra account (bookkeeping)

A contra account (known as a "kruispost" in Dutch) is a temporary account used in accounting to facilitate the transfer of amounts between different accounts within the same entity. Its purpose is to record the movement of funds or transactions that have not yet been fully processed or completed, allowing the transfer to be visible and traceable in the books until it is finalized.

Contra accounts are commonly used for:

• Internal transfers: Such as moving funds between a business’s various bank accounts or between a business and personal account
• Prepayments or advance receipts: For example, if you transfer money from a bank account to petty cash, but the transaction hasn’t been fully completed yet
• Cash discrepancies: When there are temporary differences between physical cash and the recorded amounts in the accounting system.

In the books, these transactions are recorded in a separate account, often labeled "Contra Account" or "Suspense Account." Once the transaction is fully processed, the amount is moved to its proper account, and the contra account is cleared.