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.

These transactions are recorded in the accounting books of the organisation

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 Aug 13th :: Withdrawn for Mr.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).
DrCash BookCr
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

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

Author Credit : The Edifier ... Continued Page 3

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