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 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 receipt from receivable:
Capital contribution from shareholders:
Receipt of loan from a bank:
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:
Purchase of inventory for cash:
Purchase of a machine for cash:
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Cash Drawings by owner:
Repayment of loan installment: