Cash Deposited in Bank Journal Entry

Cash deposit in bank is the process which a company takes the cash on hand and deposits it into the bank account.

Cash on hand is the sum of all cash that company has in the safe box. It is the physical cash that company own. In recent year, company operate with less and less cash on hand as most of the payment is made through bank transfer and credit card. However, there are still some retail stores that operate using cash basically. These retail stores still receive cash from the customers regarding some small purchases. There will be some risk involved when the company operation involves using physical cash. They will face the risk of fraud and stolen.

Cash at bank refers to the amount of cash that company has in the bank account. It includes saving, term deposits, and a checking account. The company is able to access these accounts at any time, there is no restriction on using these cash balances. Most companies these days operate mostly on the cash at bank. They receive revenue from customers through bank transfers and credit card. At the same time, the company pays suppliers, employees, and the government by using bank transfers. So most of the company will not require to use physical cash in their daily operation.

When the company receives physical cash, it will record it into the cash on-hand account. Subsequently, they have to deposit the cash into the bank as they have to pay the suppliers, employee,s and other parties through bank transfer. During this process, it will reduce the cash on hand balance and increase cash at bank balance.

Journal Entry for Cash Deposit into a Bank

When the company deposits cash into the bank, they simply record the cash at the bank and reverse the other cash accounts which are mostly the cash on hand. It is the movement of cash from cash on hand account to the cash a bank account. Both accounts are under the cash and cash equivalent section on the balance sheet.

The journal entry is debiting cash at bank and credit cash on hand.

The transaction will only impact the cash and cash equivalent account on the balance sheet.

Example

Company ABC is a retail store that collects some cash from the customer. At the end of the month, the company has cash on hand of $ 10,000. The accountant has to deposit all the cash on hand into the company bank account. Please prepare a journal entry for cash deposit into the bank.

The company has deposited cash into the bank. They move the cash onhand account to the cash at the bank. The journal entry is debiting cash at the bank $ 10,000 and credit cash on hand of $ 10,000.

It is just the movement of the cash account, there is no impact on the others accounts.