Cash Withdrawal from Bank Journal Entry
Since the cash at bank is an important factor for business, they will be able to increase the amount of money in the short term. For example, when businesses need to pay salaries or buy materials regularly, they can ensure that there are enough funds in bank by keeping excess cash in the safe. Moreover, with ready cash on hand, businesses can easily cope with unexpected situations, for example, sudden decrease in sales or production. As a result, this will help companies operate well and improve their business quickly.
For example, Walmart is one of the largest retail stores in the world which has cash at bank to improve its operation. In 2022, Walmart had kept 14 billion US dollars as cash at the bank.
Cash at bank is important for companies. It can make sure that they have enough funds to operate their business. Moreover, it can deal with unexpected situations easily. For example, a sudden decrease in sales or production. As a result, cash at bank helps company to improve its operation well and quickly. Walmart is one of the examples which has cash at bank.
A company deposits cash into the bank means that all company’s money is held in its bank account, whether in safes or on its way back from a business transaction. This is different from a Company Cash Deposit where the business holds an amount of money in its bank account, rather than keeping it in a safe or being on the way back from a transaction.
The company deposits cash into the bank is to understand that all companies have a set amount of money in their checking and savings accounts at any given time. It is important to note if a company has multiple accounts or bank accounts at a single bank, it is considered to have the money “at the bank,” not in each individual account.
Journal Entry for Cash Withdrawal from Bank
The withdrawal will move cash from the bank to the cash on hand. It happens when the company
The journal entry is debiting cash on hand and credit cash at bank.
| Account | Debit | Credit |
|---|---|---|
| Cash on Hand | $$$ | |
| Cash at Bank | $$$ |
It is the movement of cash and cash equivalent on the balance sheet.
Some companies do not use the cash on hand account, they use the petty cash account instead. It depends on the nature of the business and company policy. In this case, they will use petty cash instead of cash on hand.
The journal entry is debiting petty cash and credit cash at bank.
| Account | Debit | Credit |
|---|---|---|
| Petty Cash | $$$ | |
| Cash at Bank | $$$ |
Similar to the first journal entry, it is just the movement of cash from bank to petty cash. The total cash on the balance sheet remains the same.
Example
ABC is a trading company, the businesses transactions are mostly going through the banks. All of their customers pay using credit cards and bank transfers. The payments to suppliers also go through the banks. However, the company still keeps the petty cash of $500 to settle small expenses in the office. On 01 August, the accountant has withdraw cash $ 500 from the bank and keep in the petty cash box. Please prepare journal entry for cash withdrawal from bank.
On 01 August, company has moved the cash $ 500 from bank to the petty cash box. They have to reflect this transaction by recording the cash withdrawal from bank to the petty cash account.
The journal entry is debiting petty cash $ 500 and credit cash at bank $ 500.
| Account | Debit | Credit |
|---|---|---|
| Petty Cash | 500 | |
| Cash at Bank | 500 |