Deposits to Bank Accounts

by Mike
(Chennai )

I'm recording my cash/cheque transactions as follows (I'm not using Quick Books):

1. I'm maintaining a cash account which I'm using for currency & coin receipts from customers.

When I receive currency, I make the entry as follows:

Cash (Dr)
Accounts receivable (Cr)

When I bank the currency, I make the entry as follows:

Bank (Dr)
Cash (Cr)

2. For cheque receipts, I make the entry as follows, whether it is deposited on same day or on a later day. (entry recorded on receipt date)

Bank (Dr)
Accounts receivable (Cr)


My question - As I'm recording only currency collection in the cash account & cheque collections directly to the bank account, could you please tell me whether the above method complies with correct accounting procedures. Is it correct or not?

Normally in the cash book we have to record even cheque collection in cash column if it is not deposited on same day. Later we record with a contra entry when the cheques are deposited.

I would like to reduce the number of entries so is it okay to follow my method above?

Hi Mike,

It is not incorrect to record your entries as presented, however step two is not the best procedure for cheques not deposited on the same day.

Normally, it is not a good idea to try to change accounting procedures, such as trying to reduce the number of cash entries. Always try to figure out why the procedure was put in place. If the reason is still valid, it is better to not change the procedure.

I would not change procedure for the cheques deposited at a later date. I would not record cheques that are deposited on a different day to the bank column ... I would record them to the cash column as your current procedures in place suggest.

The added benefit for you when you only record the bank entry when an actual deposit is made ... it will make your bank reconciliations easier.