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:

Debit	Cash
Credit	Sales

Cash receipt from receivable:

Debit	Cash
Credit	Receivable

Capital contribution from shareholders:

Debit	Bank
Credit	Share Capital

Receipt of loan from a bank:

Debit	Bank
Credit	Loan

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:

Debit	Payable
Credit	Cash

Purchase of inventory for cash:

Debit	Purchases
Credit	Cash

Purchase of a machine for cash:

Debit	Machinery - Asset
Credit	Cash

Cash Drawings by owner:

Debit	Drawing
Credit	Cash

Repayment of loan installment:

Debit	Loan
Credit	Cash

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Accounting for Purchases

Petty Cash