The adjustment made to balance transactions in one ledger with another. The most common type of contra entry is balancing outstanding purchase ledger transactions against outstanding sales ledger transactions where you both sell to and buy from the same company.
For example: you have sold goods to XYZ to the value of $200. You have also bought goods from XYZ to the value of $100. Overall they owe you $100 - that is, what they owe you less what you owe them. A contra entry matches up the $100 you owe them against $100 they owe you.