Bank Account Details In Cash Book and In Pass Book

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Bank Transactions » Organisations Books

By bank transactions we mean all those transactions relating to the business which are considered for the purpose of accounting which have their effect on "Bank a/c" or any other account by a different name that is used by the organisation to indicate the bank a/c.

bank,reconciliation,statement

These transactions are recorded in the accounting books of the organisation

• In a journal when the subsidiary book, "Cash Book" is not being maintained. Posting is done to the Bank a/c as well as the other account affected by the transaction.
• In the bank column of "Cash Book" when the subsidiary book is being maintained.

Bank Transactions » Bank Books

An organisations bank transactions also affect the bank. They also form accounting transactions for the bank. However, their effect and influence on their accounts is not the same as the effect on the organisation.

Bank has its own books of accounts. The bank would maintain the business organisations (Say M/s Manzil Enzymes) account in its book. For the bank, the "Organisation a/c" i.e. "M/s Manzil Enzymes a/c" is a personal account. It basically deals with two types of transactions, receiving money into the organisations account or paying from the organsation a/c.

Some bank transactions relating to the organistion M/s Manzil Enzymes.

1. Aug 1st :: Paid Cash into bank (new account opened) Rs. 18,000.
2. Aug 5th:: Issued a cheque (No. AS01) to Sam Rs. 5,400 in full settlement of Rs. 5,500 due.
3. Aug 8th :: Received a cheque (No. MG41) for Rs. 12,000 towards sale proceeds and deposited the same into bank.
4. Aug 13th :: Withdrawn for Mr. Rao's personal use by cheque (No. AS02) Rs. 5,000
5. Aug 14th :: Mr. Rao, issued a cheque (No. TR82) for Rs. 50,000 towards additional capital Rs. 50,000.
6. Aug 15th :: Issued a cheque (No. AS03) for Rs. 24,000 towards purchase of Furniture.

Recording in M/s Manzil Enzymes Books

We assume that the organisation maintains a Triple Column Cash Book (subsidiary book).

Dr

Cash Book

Cr

Date	Particulars	J/F	D/A (Rs)	Cash (in Rs)	Bank (in Rs)	Date	Particulars	J/F	D/R (Rs)	Cash (in Rs)	Bank (in Rs)
1/8 8/8 14/8	To Cash a/c To Sales a/c To Capital a/c	C – –			18,000 12,000 50,000	1/8 5/8 13/8 15/8 15/8	By Bank a/c By Sam a/c By Drawings a/c By Furniture a/c By Balance c/d	C	100	18,000	5,400 5,000 24,000 45,600
	Total				80,000		Total				80,000
16/8	To Balance b/d	–			45,600

Debit?? Credit ??

The principles of debit and credit for a personal account read "Debit the benefit receiver and Credit the Giver". Therefore, whenever we deposit cash, cheques into the bank, "Bank a/c", which represents the bank is debited (being the benefit receiver). Whenever we withdraw cash or issue cheques from the bank the "Bank a/c" is credited (being the benefit giver).

In general whenever some amount gets into our bank account, Bank a/c is debited and whenever some amount goes out of our account Bank a/c is credited.

Some instances of

• Bank a/c being Debited

  1. Cash paid into the Bank
  2. Cheques received by the organisation towards the amounts it has to receive and deposited in the bank for collection. This is recorded on the date of deposit in the bank.
  3. Interest due and depostied by the bank to the organisation on the bank account balances.
  4. Direct payments by the customers into the bank account.
  5. Amounts collected by the bank on behalf of the customer like Dividends on shares, Interest on Investments, Rent on property etc. Some of these may be on a standing instruction.
  6. Amount receivable towards a bill receivable honoured on the due date, when it is collected by the bank.
  7. Amount receivable on discounting bills by the bank.

  3, 4, 5, 6 will be recorded when the information relating to the same is received from the bank. 4 may also be recorded when the customer gives such information.

• Bank a/c being Credited

  bank,reconciliation,statement

  1. Cash withdrawn from the Bank
  2. Cheques issued by the organisation towards the amounts it has to pay. This will be recorded on the date of issue of the cheque.
  3. Interest and other charges collected by the bank towards the services it provides the organisation like collection of outstation cheques etc.
  4. Amounts paid by the bank on behalf of the customer (organisation) like rent, insurance premium, etc. Some of these may be on account of a standing instruction.
  5. Amount paid towards clearing a bill payable by a cheque or by the bank directly on instructions to the bank.
  6. Amount payable towards the dishonour of a bill discounted.
  7. Cheques dishonoured by the issuer.

  3, 4, 5, 6, 7 will be recorded when the information relating to the same is received from the bank.

Standing Instruction

A standing instruction is one that is valid till the next instruction is given. We come across this term generally in banking where a standing instruction is an instruction that the customer gives to the bank, to do something on his/her/its behalf. The act that the bank does has its affect on the customers bank account. The standing instruction may be either for receipt or payment of amounts.

The bank may be instructed to make payments on behalf of the customer periodically like say payment for insurance premium, interest on loans, taxes etc. The bank may also be authorised to receive amounts on behalf of the customer like instructing the bank to credit the interest on fixed depostis in its bank account, collect interest on securities periodically etc.

The bank may charge for providing these services. What is important is that the instruction given by the customer to the bank is valid (it stands) till the customer gives another instruction to the contrary.

Recording in Bank Books (Pass Book)

We assume that the cheques received by the organisation have been deposited into the bank account and the cheques issued to outsiders have been presented for payment to the bank.

M/S Mazil Enzymes

Date	Particulars	Cheque No	Withdrawl [Debit]	Deposit [Credit]	Balance	Initial
Aug 1st Aug 5th Aug 12th Aug 13th Aug 17th Aug 18th Aug 18th	By Deposit (Cash ) To Sam (cheque) By Deposit (Cheque) By Self (Cheque) By Pine Wood Traders (Cheque) To Deposit (Cheque) By Collection Charges	AS01 MG41 AS02 AS03 TR82	5,400 5,000 24,000 120	18,000 12,000 50,000	18,000 12,600 24,600 19,600 −4,400 45,600 45,480

Debit?? Credit ??

In the accounting books of the bank, the organisation a/c representing M/s Manzil Enzymes is a personal account. Therefore, going by the principles of debit and credit for personal accounts, ("Debit the benefit receiver and Credit the Giver"), the bank debits M/s Manzil Enzymes a/c whenever they withdraw amounts from the bank (Debit the benefit receiver) and credits M/s Manzil Enzymes a/c whenever they deposit any amount in the bank (Credit the benefit giver).

In general whenever some amount gets into the customers account, the customer a/c is credited and whenever some amount goes out of the customers account, the customer a/c is debited.

The same instances when viewed from the bankers side would result in a reversal of treatment. The

• Customer (M/s Manzil Enzymes) a/c being Credited

  1. Cash paid into the Bank
  2. Cheques received by the organisation towards the amounts it has to receive and deposited in the bank for collection. This is recorded by the bank on the date of collection of the cheque. If the cheque is not collected, no amount is credited to the customers account.
  3. Interest due and depostied by the bank to the organisation on the bank account balances.
  4. Direct payments by the customers into the bank account.
  5. Amounts collected by the bank on behalf of the customer like Dividends on shares, Interest on Investments, Rent on property etc. Some of these may be on a standing instruction.
  6. Amount receivable towards a bill receivable honoured on the due date, when it is collected by the bank.
  7. Amount receivable on discounting bills by the bank.

  3, 4, 5, 6 will be recorded on the date of the transaction i.e. on collection and will be intimated by the bank to the customer.

• Customer (M/s Manzil Enzymes) a/c being Debited

  1. Cash withdrawn from the Bank
  2. Cheques issued by the organisation towards the amounts it has to pay. This will be recorded by the bank on the date on which the customer has presented it for payment (across the counter if it is a bearer cheque or through a banker if it is an account payee cheque) and payment has been made.
  3. Interest and other charges collected by the bank towards the services it provides the organisation like collection of outstation cheques etc.
  4. Amounts paid by the bank on behalf of the customer (organisation) like rent, insurance premium, etc. Some of these may be on account of a standing instruction.
  5. Amount paid towards clearing a bill payable by a cheque or by the bank directly on instructions to the bank.
  6. Amount payable towards the dishonour of a bill discounted.
  7. Cheques dishonoured by the issuer. This has no influence on the bank pass book (customers account with the bank) since it has not been recorded when the cheque is deposited for collection.

  3, 4, 5, 6, will be recorded on the date of transaction and will be intimated to the customer.

Author Credit : The Edifier

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