Cash in hand is the physical Cash kept.
Where is it kept?
Either at the Finance or Cash department.
It’s an asset to the business.
Cash at Bank Vs Cash In Hand:
These two are cash balances.
But different in respect of its form.
What’s the primary purpose?
To meet the petty expenses.
What does petty expense mean?
- Purchase of stationery,
- Staff welfare expenses,
- Postal expenses etc.
Estimated reading time: 4 minutes
Table of contents
- Cash In Hand Journal Entry
- Journal Entry analysis
- Cash in hand Journal entry FAQs
- Cash in Hand Journal Entry Summary
Cash In Hand Journal Entry
Accounting can be done only on the happening of a transaction.
The transaction here means ‘Financial transaction.’
Need an example?
Let’s throw some light on it.
For example, an employee felt happy for her manager’s appreciation.
The above transaction can’t be recorded.
What if the manager pays the employee a $5,000 cash award for the job?
Can we record this?
Along with the measurability of the transaction, there shall be at least 2 GL accounts to record a transaction. So, Cash in hand alone cannot be recorded.
The most frequent Cash in hand transaction happens along with Cash at the bank GL account. For example, Cash withdrawals and deposits. So, Cash at Bank GL appears more frequently with Cash in hand GL.
Such Cash in hand is for honoring payments for petty expenses.
Let’s record all these entries below.
Cash withdrawal Entry
Journal Entry analysis
The above two GL accounts are real accounts.
Per real account golden accounting rules, we will debit what comes in and credit what goes out.
Must read: Understand the Golden rules of accounting before recording journal entries. It’s a kind of foundation. We have a comprehensive article on such accounting rules.
Now, let’s record the journal entry for Cash in hand on payment of petty expenses like staff welfare.
Staff welfare is an expenditure account. Per Nominal account rules, we need to debit the expenses and losses and credit the income and gains.
Payment for expenses decreases the Cash. So, we will credit it.
Cash in hand Journal entry FAQs
Is Cash in hand a debit or credit?
Cash in hand is an asset to the business. So, it will have a debit balance. However, it can be credit side when the transaction involves payment.
How do you account for Cash on hand?
Receipt of Cash in hand will hit on the debit side of the Journal entry. Whereas payment results in the credit side
Is Cash in hand an asset?
Yes, Cash in hand is an asset to the business.
Is Cash on hand a revenue?
Revenue means the amount earned by performing the operational activity of the entity. For example, XYZ entity’s primary business provides annual home appliance maintenance contracts. So, Income from AMC is Revenue.
Revenue need not be in cash form. We can count the accrual transactions as revenue
Cash in hand is a form in which revenue is received. It’s a balance sheet item (asset) but not revenue.
Where does Cash in hand go in final accounts?
Cash in hand goes under the current assets category of the assets group in the balance sheet.
What’s the Cash in Hand Journal Entry?
There is no standalone Cash in hand journal entry. There need to be at least one more GL account to record the JE.
How does Cash in hand increase in balance sheet?
Increase in assets or liability results in an increased amount of balance sheet.
Cash in Hand Journal Entry Summary
Cash in hand is a GL account. So, that alone isn’t an indication of a financial transaction.
Said differently, electricity expenses paid with Cash in hand is a transaction that can be recorded. We will record the journal entry by debiting the electricity expense and crediting the cash account.
Thus, there shall be at least one other GL account to record a journal entry.
We need to also understand the nature of the Cash in hand GL. That’s part of the current asset under the Balance Sheet.