Learn accounting in Hindi-English with Rangunwala’s Academy. In this short lesson, depositing business cash into the business bank account does not create income. It transfers money from one asset account to another.
Example: ₹12,000 cash deposited into bank
Journal Entry: Bank A/c Dr. ₹12,000; To Cash A/c ₹12,000.
Why? Bank balance increases and cash in hand decreases by the same amount. There is no sales revenue or new income. If the combined cash and bank balance was ₹55,000 before the transfer, it remains ₹55,000 afterward.
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Why this transfer does not create income
Cash in hand and money in the business bank account are both assets. Moving money between them changes the form of the asset, but it does not create a sale, increase owner’s capital, or increase total assets.
Balance proof: Suppose Cash is ₹40,000 and Bank is ₹15,000 before a ₹12,000 deposit. After the deposit, Cash becomes ₹28,000 and Bank becomes ₹27,000. Total Cash + Bank is ₹55,000 both before and after the transfer.
Journal entry: Bank A/c Dr. ₹12,000
To Cash A/c ₹12,000
Bank is debited because the business bank balance increases. Cash is credited because cash in hand decreases. No Income or Sales account appears because no revenue-earning event occurred.
Three mistakes this check prevents
- Crediting Sales or Income: this overstates revenue even though the business only moved its own money.
- Recording only the Bank debit: every journal entry needs an equal credit; here the matching credit is Cash.
- Counting the deposit twice: recording both a cash receipt and a bank deposit would inflate assets. Trace the same ₹12,000 through the cash book, deposit slip and bank statement.
When money received in bank can be different
A bank receipt is not automatically a cash-to-bank transfer. If a customer pays directly into the business bank account, the credit may be Sales/Revenue when revenue is earned, or Accounts Receivable when the sale was recorded earlier. The source and purpose of the receipt decide the credit account.
Reconciliation self-check
Before transfer: Cash ₹25,000 and Bank ₹10,000. The business deposits ₹6,000 cash into its bank. After transfer, Cash is ₹19,000 and Bank is ₹16,000. The combined total remains ₹35,000. If your books show any other combined total, check for a missing Cash credit or a duplicated receipt.
Quick practice
Question: A business deposits ₹5,000 of its cash into its own bank account. Which account is debited? Answer: Bank A/c is debited and Cash A/c is credited by ₹5,000.
Continue the free learning path: start with Why Businesses Need Accounting, then study Debit and Credit Explained Through Logic and Journal Entries Step by Step.
Video and lesson by Ejaj Abubakar Rangunwala · Rangunwala’s Academy.