Cash in hand journal entry refers to the amount of cash a business physically possesses at any given time. Recording transactions involving cash in hand accurately is crucial for maintaining proper financial records.
Key Concepts
- Cash in Hand: The actual cash available within the business.
- Various Accounts: Depending on the transaction, this could be a revenue account, an expense account, a receivable account, etc.
Journal Entry for Increasing Cash in Hand
Example Scenario
Assume a company receives cash of ₹50,000 from a customer on 01-08-2023 for services rendered.
Step-by-Step Journal Entry
- Record the Cash Received
| Date | Account Title | Debit (INR) | Credit (INR) | Description |
|---|---|---|---|---|
| 01-08-2023 | Cash in Hand | 50,000 | Cash received from customer | |
| 01-08-2023 | To Service Revenue | 50,000 | Revenue from services rendered |
Explanation
- Debit to Cash in Hand: This increases the cash in hand, reflecting the cash received.
- Credit to Service Revenue: This records the revenue earned from the services rendered.
Journal Entry for Decreasing Cash in Hand
Example Scenario
Assume a company pays cash of ₹20,000 for office supplies on 05-08-2023.
Step-by-Step Journal Entry
- Record the Cash Payment
| Date | Account Title | Debit (INR) | Credit (INR) | Description |
|---|---|---|---|---|
| 05-08-2023 | Office Supplies Expense | 20,000 | Cash payment for office supplies | |
| 05-08-2023 | To Cash in Hand | 20,000 | Cash payment for office supplies |
Explanation
- Debit to Office Supplies Expense: This increases the office supplies expense account, reflecting the cost incurred.
- Credit to Cash in Hand: This decreases the cash in hand, reflecting the cash paid.
Conclusion
Accurately recording transactions involving cash in hand ensures that the business’s cash position is correctly represented in the financial statements. Properly managing these transactions helps maintain accurate and reliable financial records, contributing to better cash flow management and financial reporting.