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Cash paid into bank and withdrawn from bank

Businesses need sufficient cash reserves to pay off day to day expenses and in some cases businesses have cash reserves more than their needs. Therefore, firms withdraw and deposit cash into their bank account frequently

When business receives or has cash and pay into business bank account

This transaction has the following effects

There is a decrease (-) in the asset which is Cash
There is an increase (+) in the asset which is Bank in this case

Therefore, double entry should be:

  Bank   -------> Debit

  Cash   -------> Credit

When business need liquid cash for paying expenses or any other needs and withdraw cash from business bank account

This transaction has the following effects

There is an increase (+) in the asset which is cash
There is a decrease (-) in the asset which is bank in this case

Therefore, the double entry should be:

Cash   -------> Debit

Bank   -------> Credit

EXAMPLE



   June 1.A receipt of $5000 form a debtor MR. M
   June 3.The Receipt of $5000 deposited in the bank account
   June 5.$600 withdrew from bank for sundry expenses
  


                                                                       Cash Book
Dr. (Debit)                                                                                                                                        Cr. (Credit)

Date
Description
Folio
Discount
Cash
Bank
Date
Description
Folio
Discount
Cash
Bank
Jun.2
      3
      5
Mr. M
Cash
Bank








5000

600

5000
Jun.3
      5
Bank
Cash









5000
600

    




    






Did you notice? we have posted a single transaction on both sides of cash book because these kinds of transactions effect both debit and credit sides