Introduction to Cash at Bank and in Hand
Cash at bank and in hand refers to amounts which are held by a business in the form of notes and coins (e.g. petty cash) or which are held at a bank in the form of on demand deposits such as current accounts and savings accounts.
Cash at bank and in hand is part of current assets in the balance sheet.
How do you record Cash at bank and in hand?
There are two main components of cash at bank and in hand. The first is cash at hand, which refers to physical currency, coins, and checks that a business has on its premises. This may be kept in a cash register, petty cash box, or other secure location. Cash at hand is generally used for small transactions, such as making change for customers or reimbursing employees for small expenses. Cash in hand transactions are normally recorded in the cash book or petty cash book as appropriate.
The second component is cash at bank, which refers to money that a business has deposited in a bank account. This may include checking accounts, savings accounts, money market accounts, and other types of deposit accounts. Cash at bank is generally used for larger transactions, such as paying bills, making payroll, and making large purchases. Normally cash at bank transactions are recorded in the cash book.
Cash in Hand Journal Entry
To illustrate suppose firstly a check is used to pay a supplier for 100, and secondly an amount is received from a customer for 300. In this case the following entries would be made in the cash book.
Cash in Hand General Ledger Journal Entry
As there are usually a large number of entries, cash transactions are not normally recorded directly into the general ledger. Instead cash book totals would be posted to the general ledger accounts.
To illustrate, assuming the cash book postings above are the only postings for the period, the totals would be posted to the general ledger as follows.
| Account | Debit | Credit |
|---|---|---|
| Cash | 300 | 100 |
| Purchase ledger | 100 | |
| Sales ledger | 300 | |
| Total | 400 | 400 |
The net posting to the cash account is a debit of 200. This represents the net cash received by the business being 300 received from customers and 100 paid to suppliers. The remaining postings in this composite journal are a debit to the purchase ledger which reduces the amount due to suppliers, and a credit to the sales ledger which reduces the amount due from customers.
About the Author
Chartered accountant Michael Brown is the founder and CEO of Double Entry Bookkeeping. He has worked as an accountant and consultant for more than 25 years and has built financial models for all types of industries. He has been the CFO or controller of both small and medium sized companies and has run small businesses of his own. He has been a manager and an auditor with Deloitte, a big 4 accountancy firm, and holds a degree from Loughborough University.