About Cash and Bank Accounts

Cash and Bank Accounts

Where there is only a journal being maintained for the purpose of recording transactions in an organisation, Cash Account and Bank Account are nothing but ledger accounts. Every transaction is recorded in the journal and posted therefrom into the ledger. Therefore with regard to cash and bank transactions (or for that matter any transactions) we see recording and posting taking place.

Some Cash and Bank Transactions

  1. June 5th :: Sold Goods for Cash Rs. 50,000
  2. June 6th :: Paid into Bank Rs. 40,000
  3. June 8th :: Paid Ram by cheque Rs. 3,000
  4. June 8th :: Bought Goods for Cash Rs. 8,000
  5. June 9th :: Withdrawn from bank for parnters personal use Rs. 1,000
  6. June 10th :: Received payment from Ghanshyam on account by cheque Rs. 12,000

Journal entries for the above transactions would be Hide/Show

Journal in the books of M/s __ for the period from ____ to _____
Date V/R
No.
L/F Debit Amount
(in Rs)
Credit Amount
(in Rs)
June 5th Dr
50,000
50,000
June 6th Dr
40,000
40,000
June 8th Dr
3,000
3,000
June 8th Dr
8,000
8,000
June 9th Dr
1,000
1,000
June 10th Dr
12,000
12,000

The Ledger Accounts

DrCash a/cCr
Date Particulars J/F Amount
(in Rs)
Date Particulars J/F Amount
(in Rs)

Jun 5th
To Balance b/d
To Sales a/c
 


 
12,000
50,000
 
Jun 6th
Jun 8th
By Bank a/c
By Purchases a/c
By Balance c/d


40,000
8,000
14,000
  Total   62,000   Total   62,000
To Balance b/d 14,000        

DrBank a/cCr
Date Particulars J/F Amount
(in Rs)
Date Particulars J/F Amount
(in Rs)

Jun 6th
Jun 10th
To Balance b/d
To Cash a/c
To Ghanshyam a/c


 
32,000
40,000
12,000
Jun 8th
Jun 9th
By Ram a/c
By Drawings a/c
By Balance c/d


3,000
1,000
80,000
  Total   84,000   Total   84,000
To Balance b/d 80,000        

Where Subsidiary Books are Maintained (Cash Book)

Where subsidiary books are being maintained in the organisation, Cash and Bank transactions are recorded at the same place in a book called "Cash Book". The Cash Book is maintained in a ledger account format. It has got a debit side as well as a credit side. Recording in this book is done exactly in the same manner as posting the journal entry into the ledger.

A Cash Book is a subsidiary book. It has the peculiarity of being both a journal as well as a ledger. If a transaction is entered in the Cash Book, both the recording aspect as well as the posting aspect are complete, i.e. it amounts to writing the journal entry as well as posting into the ledger.

We know that posting is to be done into two ledger accounts. Writing in the Cash book amounts to completion of posting in the ledger accounts within the cash book i.e. the Cash a/c and Bank a/c. Posting into the other account involved in the transaction has to be done and that cannot be assumed to be complete.

Types of Cash Books

What difference does using or not using Subsidiary Books make?

Maintaining the details realting to Cash and Bank transactions with or without the subsidiary book called "Cash Book" would influence the way we record the transactions.

If we are not using the subsidiary book, then a journal entry should be recorded for each transaction and then it should be posted into the relevant ledger accounts affected by the transaction.

If we are using the subsidiary book, "Cash Book" then a special journal entry should be recorded for each transaction in the cash book. This would be in the form of a ledger posting (including narration). The ledger posting relating to a second ledger account (other than either cash a/c or bank a/c) should be done. The posting relating to the cash a/c or bank a/c involved in the transaction is complete at the time the entry is recorded since the Cash book acts both as a journal as well as a ledger with regard to cash a/c and bank a/c.

However, when the transaction involves both the cash a/c and the bank a/c, the second posting should also be done in the "Cash Book" itself, in which case we cannot assume that posting with regard to cash a/c and bank a/c is complete immediately on the transaction being recorded. Only one of the postings can be assumed to be complete in such a case.

Bank Column of Cash Book

In learning this topic, we will be concerned about the Bank account being maintained in the accounting books of the organisation. The bank account is addressed "Bank a/c", "Bank Column", "Bank Column of Cash Book", "Cash Book Bank Column", etc. In all these situations we should understand it to be a reference to "Bank a/c".

Author Credit : The Edifier ... Continued Page 2

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