Journal Entry for Cash on Hand Received
Cash on Hand is the cash balance that company keeps in a safe box to support the daily operation. It helps the company to access the cash whenever they want.
Cash on hand can be received from the movement of cash from the bank. Some businesses require to have a certain amount of cash on hand in the company. When the balance falls below the required amount, management needs to withdraw cash from the bank and keep it in the safe box within the company.
Cash on hand is also received from the sale of goods or services. It happens when the company uses cash sales which mostly happens in the retail store. Company sells the goods to the final consumers
When the cash on hand balance rises over a certain threshold, the company needs to deposit it into the bank. Keeping too much cash balance in the company will be risky for staff as well as the company. It will be a risk of fraud when staff in charge with a huge amount of cash. They can steal or commit fraud due to get the cash. Moreover, the company and staffs also face a high risk of the thief from the outside. Both results will not be goods for company, so management must have a proper policy to control the cash balance when it reaches a certain level.
Journal Entry for Cash on Hand Received
By telling the cash on hand received, we can only record the increase of cash. We do not know exactly the other side of double entry. So we have to understand the transaction which lead to the cash received.
First, the cash may be moved from cash at bank. If so, the company needs to record an increase of cash on hand and decrease cash at bank.
The journal entry is debiting cash on hand and credit cash at bank.
| Account | Debit | Credit |
| Cash on Hand | XXXX | |
| Cash at Bank | XXXX |
Second, the cash on hand received from the sale of goods or services. We need to record cash and sale revenue.
The journal entry is debiting cash on hand and credit sale.
| Account | Debit | Credit |
| Cash on Hand | XXXX | |
| Sale | XXXX |
Third, the cash can be the collection from outstanding accounts receivable.
The journal entry is debiting cash on hand and credit accounts receivable.
| Account | Debit | Credit |
| Cash on Hand | XXXX | |
| Accounts Receivable | XXXX |
Moreover, there are a few more cases that lead to cash on hand receive. It may receive from shareholder invest or loan from other parties. However, most of these transactions will be made through bank rather than cash on hand. The transaction will not much different from about mentioned.
Journal Entry for Cash on Hand Received Example
ABC is a retail store that sells directly to consumers. Most customers use a credit card to settle their purchases. However, some customers still use cash to settle. There are a few transactions below:
- On 01 June, company has withdrawn cash $ 10,000 from bank to cash on hand
- On 15 June, the company has received cash of $ 2,000 from the sale
- On 20 June, company receives cash of $ 5,000 from a customer who purchase on credit last month.
- On 25 June, company receive cash of $ 50,000 from the owner as of the capital injection.
Please prepare the journal related to cash received.
On 01 June, the company received cash from bank. It means they withdraw cash from bank to cash on hand. The journal entry is debit cash on hand $ 10,000 and credit cash at bank $ 10,000.
| Account | Debit | Credit |
| Cash on Hand | 10,000 | |
| Cash at Bank | 10,000 |
It is just the movement of cash from bank to cash on hand. It will not impact others’ accounts.
On 15 June, the company receives cash from the sale of goods. So they need to record cash on hand and sales revenue.
The journal entry is debiting cash on hand $ 2,000 and credit sales revenue $ 2,000.
| Account | Debit | Credit |
| Cash on Hand | 2,000 | |
| Sales Revenue | 2,000 |
Cash on hand will increase by $ 2,000 on balance sheet and sales will increase on income statement.
On 20 June, company collects cash from the customer who purchase on credit.
The journal entry is debiting cash on hand $ 5,000 and credit accounts receivable $ 5,000.
| Account | Debit | Credit |
| Cash on Hand | 5,000 | |
| Accounts Receivable | 5,000 |
On 25 June, company receive a new capital injection from the owner of $ 50,000.
The journal entry is debiting cash on hand $ 50,000 and credit share capital $ 50,000.
| Account | Debit | Credit |
| Cash on Hand | 50,000 | |
| Share Capital | 50,000 |