A Brief Understanding of the Contra Accounting
In the world of business accounting plays a very major role. It is really so important that almost none of the businesses can think of surviving in the present times if they do not have an efficient accounting system in place. Accounting generally means taking care of the finances of the company. It means managing the flow of the finances in the organization. In general it is like keeping a hawk’s eye on the whereabouts of the finances of the organization. Everybody is aware about the fact that the finances of the individual as well as the organization can go a long way in determining the growth. In many cases the company owner might feel compelled or even wishfully do the accountings work him but that is not at all advisable. Accounting in the present times has become so complicated that it needs special education as well as training to carry out the job.
On the basis of the requirements of the company and other agencies, the field of accounting has been segregated into diverse fields. These are the financial accounting, the management accounting, the cost accounting, tax accounting, forensic accounting, staff accounting and contra accounting. Among these the contra accounting is very much different than the other types of accounting. The very nature as well as the manner of contra accounting is different than the other types of accounting.
While in the other accountings the creditors as well as the debtors of the company are different, in the case of the contra accounting the scene is quite different. There might be cases, when a person or an entity is a buyer but as well as the seller to the business. In such cases the accounting done to record the transactions between the two entities is called contra accounting. In such cases rather than physically making the payment via check/draft or cash the settling of the account is done by setting off the amount that is due by him to the company and the amount that is due by the company to him. The contra accounting requires the setting off to be reflected in the total accounts or control accounts.