Factory accounts

Our Company Accounts maintain by Two Way... One Way at Head Office and another Way at Factory i.e factroy expenses 

Finally Factory accounts will marge with Head Office accounts through Factory Trial Balance and make Company Balance Sheet.

But recently our Company  Opened a New  Bank Account for Factory Accounts purpose only and accordingly all transactions of New Bank Account are entered in Factory accounts..... But some Accounts Entry problem is arised at Factory Accounts.-----

Problem Details : Suppose : Head Office Bank is -- "'A'"and Factory Bank is '"B"" ---- When Head Office doing Fund Transfer From Head Office Bank "A" to Factory Bank "B" then our Accounts Manager informed that this is a Mandatory  Contra Entry due to two banks are under same Company and this Contra entry never changed ... Now question is how to make entry  in Factory Bank Book. If Head Office Fund Transfer is showing under Factory Account  instead of Contra Entry then there is no Problems.

Please reply me  (a) Said Contra Entry is Mandatory yes or no ?? If yes how to make entry in Factory Bank Book

Thanks ...... 

Replies (1)

If a transaction requires entries on both the debit and the credit sides simultaneously, it is called 'Contra entry'.

Usually, the contra entries will appear in the following occasions.

a. When an account is opened with a bank.
b. The firm's cash is deposited in the bank.
c. The cash is withdrawn from bank for office use.
d. The cheques received from debtors, are deposited in the bank.

In transactions a&b, the cash balance available with the firm is decreased, the cash in bank is increased. In transaction 'c', the cash in the bank is decreased and the cash in the firm is increased.

Open head office a/c in your factory books. Similary open factory account in head office books. so no contra entry in this regard as per my opinion. 

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