Bank Account Details In Cash Book and In Pass Book
Bank Transactions
Some bank transactions relating to the organisation M/s Manzil Enzymes.
Aug 1st | : | Paid Cash into bank (new account opened) 18,000. |
5th | : | Issued a cheque (No. AS01) to Sam 5,400 in full settlement of 5,500 due. |
8th | : | Received a cheque (No. MG41) for 12,000 towards sale proceeds and deposited the same into bank. |
11th | : | Issued a cheque for 4,920 (No. AS02) to a supplier Jax & Co in full settlement of the amount due of 5,000. |
13th | : | Withdrawn for Mr. Rao's personal use by cheque (No. AS03) 5,000 |
14th | : | Mr. Rao, issued a cheque (No. TR82) for 50,000 towards additional capital 50,000. |
15th | : | Issued a cheque (No. AS04) for 24,000 towards purchase of Furniture. |
Organisations Books
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.
Recording in M/s Manzil Enzymes Books
Assuming that the organisation maintains a Triple Column Cash Book (subsidiary book), the recordings of the transactions would be as follows.Dr Cr | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Date | Particulars | L/F | D/A | Cash | Bank | Date | Particulars | L/F | D/R | Cash | Bank |
01/08/ 08/08/ 14/08/ |
To Cash To Sales To Capital |
C – – |
|
|
18,000 12,000 50,000 |
01/08/ 05/08/ 11/08/ 13/08/ 15/08/ |
By Bank By Sam By Jax & Co By Drawings By Furniture By Balance c/d |
C |
100 80 |
18,000 |
5,400 4,920 5,000 24,000 40,680 |
Total | 80,000 | Total | 80,000 | ||||||||
16/8 | To Balance b/d | – | 40,680 |
Debit/Credit
Bank account representing an organisation (bank), is a personal account. The principles of debit and credit for a personal account being-
Debit the benefit receiver
Bank a/c is debited whenever there is a transaction that results in the bank balance increasing like depositing cash, cheques issued by customers etc. In this case bank stands in the position of benefit receiver.
Some instances of Bank a/c being debited
- Cash paid into the Bank
- 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.
- Interest due and deposited by the bank to the organisation on the bank account balances.
- Direct payments by the customers into the bank account.
- 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.
- Amount receivable towards a bill receivable honoured on the due date, when it is collected by the bank.
- Amount receivable on discounting bills by the bank.
Transactions 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.
-
Credit the benefit giver
It is credited whenever there is a transaction that results in the bank balance getting reduced like withdrawing cash, cheques issued to customers etc. In this case bank stands in the position of benefit giver.
Some instances of Bank a/c being credited
- Cash withdrawn from the Bank
- Cheques issued by the organisation towards the amounts it has to pay. This will be recorded on the date of issue of the cheque.
- Interest and other charges collected by the bank towards the services it provides the organisation like collection of outstation cheques etc.
- 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.
- Amount paid towards clearing a bill payable by a cheque or by the bank directly on instructions to the bank.
- Amount payable towards the dishonour of a bill discounted.
- Cheques dishonoured by the issuer.
Transactions 3, 4, 5, 6, 7 will be recorded when the information relating to the same is received from the bank.
Standing Instruction
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 deposits 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.
Bank Books - Organisation's transactions
Bank has its own books of accounts. The bank would maintain the business organisations account in its book. M/s Manzil Enzymes in the above case. 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.
Pass Book (copy of customer account in Bank books)
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.Date | Particulars | Cheque No |
Withdrawal [Debit] |
Deposit [Credit] |
Balance | Initial |
---|---|---|---|---|---|---|
01/08/ 05/08/ 10/08/ 12/08/ 13/08/ 17/08/ 18/08/ 18/08/ |
By Cash (Deposit) To Cheque (Sam) By Cheque (Collection) To Cheque (Jax & Co) By Cheque (Self) By Cheque (Pine Wood Traders) To Cheque (Collection) By Collection Charges |
AS01 MG41 AS02 AS03 AS04 TR82 |
5,400 4,920 5,000 24,000 120 |
18,000 12,000 50,000 |
18,000 12,600 24,600 19,680 14,680 −9,320
40,68040,560 |
Debit/Credit
In the accounting books of the bank, the organisation account, is a personal account. The principles of debit and credit for a personal account being-
Debit the benefit receiver
Organisation a/c is debited whenever there is a transaction that results in the balance in its account decreases like when withdrawing cash, cheques issued to customers etc. In this case the organisation stands in the position of benefit receiver.
Some instances of Organisation a/c being debited
- Cash withdrawn from the Bank
- 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.
- Interest and other charges collected by the bank towards the services it provides the organisation like collection of outstation cheques etc.
- 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.
- Amount paid towards clearing a bill payable by a cheque or by the bank directly on instructions to the bank.
- Amount payable towards the dishonour of a bill discounted.
- 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.
Transactions 3, 4, 5, 6, will be recorded on the date of transaction and will be intimated to the customer.
-
Credit the benefit giver
It is credited whenever there is a transaction that results in the balance in the organisation account increases like depositing cash, cheques issued by customers deposited in the bank etc. In this case the organisation stands in the position of benefit giver.
Some instances of Organisation a/c being credited
- Cash paid into the Bank
- 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.
- Interest due and deposited by the bank to the organisation on the bank account balances.
- Direct payments by the customers into the bank account.
- 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.
- Amount receivable towards a bill receivable honoured on the due date, when it is collected by the bank.
- Amount receivable on discounting bills by the bank.
Transactions 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.