Cash Transactions


Cash transactions are ones that are settled immediately in cash. Cash transactions also include transactions made through cheques. Cash transactions may be classified into cash receipts and cash payments.

Cash Receipts

Cash receipts are accounted for by debiting cash / bank ledger to recognize the increase in the asset.

Following are common types of cash receipt transactions along with relevant accounting entries:

Cash Sale:

DebitCash
CreditSales

Cash receipt from receivable:

DebitCash
CreditReceivables

Capital contribution from shareholders:

DebitBank
CreditShare Capital

Receipt of loan from a bank:

DebitBank
CreditLoan payable

Cash Payments

Cash payments are accounted for by crediting the cash / bank ledger to account for the decrease in the asset.

Following are common types of cash payment transactions along with relevant accounting entries:

Cash payment to a payable:

DebitPayable
CreditCash

Purchase of inventory for cash:

DebitPurchases
CreditCash

Purchase of a machine for cash:

DebitMachinery - Asset
CreditCash

Cash Drawings by owner:

DebitDrawing Account
CreditCash

Repayment of loan installment:

DebitLoan Payable
CreditCash