Cash banked & the Bank/cash account

Danielle Milton

I was reading my books getting ready for my level three classes in September and I found a transaction listed which has confused me. Basically, the cash taking are banked and it shows what happens to the bank account.

So first you have the bank account and you debit it to show the 'cash' is going into the bank. You then do double entry which is the credit the Sales Revenue account. This bit I understand because you need to show the 'cash' going into the bank and the income account. However, after this I lose it. The cash is logged in the cash column of the bank which seems off because shouldn't it now be bank?

Also you then need to debit the bank account again this time in the bank column and then credit the bank account bank column. So you have three entries in bank, two debits and one credit. I understand that the one CR in the cash and the one DR in cash will cancel each other so the only one left is the Bank which shows the 'cash' has been banked and now is 'bank' not cash. However, I'm a little confused as to why it is done this way. Is there a chapter in the books which explains this type of transaction in more detail I can read?

Many thanks,

crispy

Hello,

Not sure if I understand your question properly, but in some accounting systems the cash-book will effectively form part of the double entry system (acting as the bank account) and in others the cash-book will act as a book of prime entry from then which it transferred from to the Bank account in the nominal ledger.

This may / or may not of been of any help.

Danielle Milton

It's not the cash book it's the account. I'm seeing cash which the company has collected being cashed at the bank. The bank account has two columns one for Bank (as in money in the bank) and one for cash (as in physical cash sitting in tills or petty cash box, etc). So basically, the cash is moving from the cash column in the bank account to the bank column in the bank account. I'm just getting confused about why this required three transactions in the bank account and one in the Sales Revenue account.

welshwizard

Try this:

Make the cash sales (into a till for example)

Debit Cash, Credit Sales (and VAT if necessary)

Bank cash from this sale

Debit Bank, Credit Cash

Does this help?