All businesses big and small need to hold some cash. This is referred to as “cash in hand.” Cash refers to money that is held in the office or shop. Small daily needs like purchasing stationery or paying wages, for example. In accounting, we use something called a journal entry to record this cash. How we record this cash in the books of business is the cash-in-hand journal entry. It is an entry in which we debit the cash in hand if cash comes in and we credit when cash goes out. The cash-in-hand journal entry is one of the initial but essential journal entries in bookkeeping.
In this article, we will learn journal entries of cash in hand, their various cases and how to post them. We will also cover the cash in hand journal entry in tally, how to treat it with cash at the bank and also cash in hand ka journal entry with examples.
What is Cash in Hand in Accounting?
Cash in hand refers to the cash that a company carries with it. This money is available for small, immediate business needs. Every business requires liquid money for daily operations. This funding can be used for:
- Paying wages to workers
- Offering staff a tea or snacks in the office
- Giving transport allowance
- Paying courier charges
All these are done in cash, not through bank. Thus the importance of not only keeping but recording cash.
Cash in hand is considered an asset in books. It means it adds value to the business. It appears on the left side of a balance sheet. For example, when cash is received by the business we debit the cash in hand. When it is spent, we credit it. This is the rule.
For example:
The cash in hand journal entry would be as follows if we receive ₹5,000 from a customer in cash.
Cash A/c Dr ₹5,000
To Customer A/c ₹5,000
That means cash is received so we debit cash in hand.
Why It Is Important
- The amount of cash retained within the business
- Helps avoid misuse of funds
- Keeps expenses in check
- Indicates accurate amount of cash in hand
In most businesses, cash in hand journal entries are performed daily.
Rules for Journal Entry of Cash in Hand
Each journal entry must be in compliance with accounting laws before making an entry in a journal. In this case, we apply the Golden Rules of Accounting.
Golden Rule for Cash
- Cash is a real account.
- Here is the golden rule for real account:
Debit what comes in, credit what goes out
This means:
- Cash entered the business → Debit cash
- When there is cash outflow from business → Credit cash
Common Journal Entries for Cash in Hand
There are some common entries for cash in hand which is used by every business in different situations. Now, let us see a few examples of cash in hand journal entries in different scenarios:
| Transaction | Journal Entry |
| Owner brings cash as capital | Cash A/c Dr To Capital A/c |
| Cash received from customer | Cash A/c Dr To Customer A/c |
| Paid rent in cash | Rent A/c Dr To Cash A/c |
| Cash sales | Cash A/c Dr To Sales A/c |
| Cash purchases | Purchase A/c Dr To Cash A/c |
In all these, the journal entry cash in hand varies with the inflow/outflow of cash.
Cash in Hand and Cash at Bank Journal Entry
We do sometimes move funds from cash into the bank. Such movements must be properly reflected in the books. These often have them in businesses.
Cash in Hand & Cash at Bank: The Difference
- Liquidity: Cash in hand: Physical cash in office
- Cash at bank: Money available in current or savings account
- Both are assets. But we use them differently in the individual entries.
Example Entries
- Cash withdrawal from bank for the use of office
Cash A/c Dr
To Bank A/c
- Bank deposit Cash or other currency
Bank A/c Dr
To Cash A/c
- Received a cheque. Deposited in bank.
Bank A/c Dr
To Customer A/c
Journal entry for cash in hand & cash at bank. These must be memorized by students.
Balance of Cash in Hand Journal Entry
In order to record balance of cash in hand, entry includes date of entry, debiting the cash in hand account and cash source will get credited. Sometimes, we need to verify the total cash available. This is the balance. You record closing balance on the end of the day or at the end of the month.
How to Check Cash Balance
- Verify all cash receipts and disbursements at close of business.
- Then calculate:
Closing cash balance = Opening balance + Cash received – Cash paid
We do not pass the journal entries for cash balance every days However, during audits or stock taking we have to match it.
Entry for Opening Cash Balance (Start of Business)
If the business has ₹50,000 cash to start with, Then:
Cash A/c Dr ₹50,000
To Opening Balance A/c 50,000
The balance of Cash in hand journal entry for opening balance simply establishes the opening cash amount.
Cash in Hand Journal Entry in Tally
Tally is the most popular accounting software in India. It records transactions that affects cash balance. This is not the only entry to reflect cash but it also shows cash source or its dispositions. Learning how to record cash in hand journal entry in tally is very simple.
Process to Pass Journal Entry in Tally
- Open Tally and click on Accounting Vouchers.
- Choose “F7 – Journal” for non-cash transactions; “F5 – Payment” for cash payments
- Click on Cash A/c and other ledgers
- Enter amount and narration
- Save entry
Example- Recording Cash Received from Customer
- Go to Receipt Voucher
- Debit Cash A/c
- Credit Customer A/c
- In reason write “Amount received from Ramesh for services rendered”
- Save
The cash in hand journal entry in tally will be noted like this. You always check if debit is equal to credit before you save.
Cash in Hand Journal Entry– Special Situations
Cash in hand entries shows cash is available for business. The basic entry involves debiting cash in a hand account and crediting cash source. These entries generally show that businesses have received cash. In some instances, there is a different usage of cash in hand. Let us understand these now.
Journal Entry for Business to Start.
If a business starts with ₹1,00,000 cash:
Cash A/c Dr ₹1,00,000
To Capital A/c ₹1,00,000
Journal Entry for Cash Loan Received
If the business borrows ₹20,000 in cash:
Cash A/c Dr ₹20,000
To Loan A/c ₹20,000
Journal Entry for Cash Payment of Salaries
If salary is ₹15,000:
Salary A/c Dr ₹15,000
To Cash A/c ₹15,000
A physical cash in hand journal entry of these have to be practiced.
Relevance to ACCA Syllabus
Journal entries, including cash ones, are the meat and potatoes of business accounting, and in this post, I will try to explain them per ACCA’s FA (Financial Accounting) and MA (Management Accounting) papers. There’s nothing more dangerous than inaccurate double-entry bookkeeping skills — the foundation of every financial report and audit in the world.
Cash in Hand Journal Entry ACCA Questions
Q1: Journal entry when cash is received from debtor
A) Debtor A/c Dr, Cash A/c Cr
B) Cash A/c Dr, Debtor A/c Cr
C) Sales A/c Dr, Cash A/c Cr
C) Cash A/c Dr, Capital A/c Cr
Answer: B
Q2: The “Cash in Hand” is shown in the final accounts under current assets.
A) In the Non-current Liabilities section
B) In the Statement of Profit or Loss
C) As a Current Asset in the Balance Sheet
D) In Shareholder’s Equity
Answer: C
Q3: What is the correct journal entry, if cash has been deposited into the bank?
A) Bank A/c Dr, Cash A/c Cr
B) Cash A/c Dr, Bank A/c Cr
Dr to Cash A/c and Cr to Capital A/c.
D) Bank A/c Dr, Debtor A/c Cr
Answer: A
Q4: What kind of account is “Cash in Hand”?
A) Nominal Account
B) Personal Account
C) Real Account
D) Revenue Account
Answer: C
Q5: Identify the entry related to the cash payment for rent.
A) Cash A/c Dr, Rent A/c Cr
B) Rent A/c Dr, Cash A/c Cr
C) Rent A/c Dr, Bank A/c Cr
D) Rent Account Dr Rent.
Answer: B
Relevance to US CMA Syllabus
CMA Part 1 — Recording financial transactions including cash management and internal controls The correct cash in hand journal entry helps to analyse the liquidity and business cash flow planning.
Cash in Hand Journal Entry US CMA Questions
Q1: A company receives cash for sales ₹ 15,000. The correct journal entry is which?
A) Sales A/c Dr, Cash A/c Cr
B) Cash A/c Dr, Sales A/c Cr
C) Bank A/c Dr, Sales A/c Cr
D) Revenue A/c Dr, Cash A/c Cr
Answer: B
Q2: Cash withdrawal from the bank for office use is accounted for as:
A) Bank A/c Dr, Cash A/c Cr
B) Cash A/c Dr, Bank A/c Cr
B) Cash A/c Cr, Capital A/c Dr
D) Office A/c Dr, Cash A/c Cr
Answer: B
Q3: Which of the following is a part of cash-in-hand?
A) Revenue
B) Expense
C) Asset
D) Equity
Answer: C
Q4: The cash in hand balance shows a negative amount in trial balance.
A) High profitability
B) Error in accounting
C) Increased revenue
D) Increased capital
Answer: B
Q5: Which of the following is an example of good liquidity management?
A) The cash in hand balance is accurate
B) More fixed assets
C) High depreciation
D) Outstanding payables
Answer: A
Relevance to US CPA Syllabus
CPA candidates must recognize asset class, understand internal control, and record cash flows in the Financial Accounting and Reporting (FAR) section. Journal entry to track cash in hand is essential for creating balance sheets and making adjustments entries.
Cash in Hand Journal Entry US CPA Questions
Q1: What is the name of the financial statement that reports cash in hand?
A) Statement of Income
B) Statement of Equity
C) Balance Sheet
D) Remarks to Financial Statements
Answer: C
Q2: When a business owner invests cash into the business, what is the journal entry?
A) Dr. Capital A/c, Cr. Cash A/c
Also Read : Also Read : A) Cash A/c Dr, Capital A/c Cr.
C) Loan A/c Dr, Cash A/c Cr
Cash A/c DrCash A/c DrRevenuesA/c Cr
Answer: B
Q3: When cash is deposited into the bank it goes onto the books as:
A) Cash A/c Dr, Bank A/c Cr
B) Bank A/c Dr, Capital A/c Cr
C) Bank A/c Dr, Cash A/c Cr
D) Sales A/c Dr, Cash A/c Cr
Answer: C
Q4: Which of the following is not comprised in the ‘cash in hand’?
A) Coins
B) Bank draft
C) Currency notes
D) Petty cash
Answer: B
Q5: How does a wrong entry in cash in hand affect financial statements?
A) Only affects equity
B) Impacts liquidity and current assets
C) No effect
D) Increases liabilities
Answer: B
Relevance to CFA Syllabus
Students are required to study and interpret cash flow statements in CFA Level I and II and current assets. Recording cash in hand guides ratio analysis and liquidity forecasting.
Cash in Hand Journal Entry CFA Questions
Q1: What line on the balance sheet is “cash in hand” under IFRS?
A) Intangible asset
B) Equity
C) Current asset
D) Liability
Answer: C
Q2: A company paid too much for cash on hand. Which financial ratio is most impacted?
A) Debt-to-equity
B) Return on assets
C) Current ratio
D) Inventory turnover
Answer: C
Q3: Where in cash flow statement cash in hand appears?
A) Operating activities
B) Investing activities
C) Financing activities
D) Retained earnings
Answer: A
Q4: How is liquidity analysis affected by cash in hand?
A) It reduces liquidity
B) It improves liquidity
C) It increases liabilities
D) It only impacts profitability
Answer: B
Q5: Cash in hand is added to when assessing a firm’s cash position:
A) Inventories
B) Accounts receivable
C) Other liquid assets
D) Accrued expenses
Answer: C
