When cash already belonging to the business is deposited into its bank account, debit Bank and credit Cash on hand. The deposit changes the location of money; it does not create another sale. Establish where the cash came from and whether its original receipt has already been recorded before choosing the counterpart account.
Trace the cash before the bank credit
A deposit can contain retail collections, customer debt repayments, owner funding or another supported source. The physical act of banking the money does not determine which source generated it.
If cash sales were already recorded as Cash debit and Sales and tax credits, the later deposit should clear cash. Crediting sales again would count the same collection twice. Conversely, an owner depositing personal money directly into the business bank may require a capital or loan entry rather than a cash contra entry.
Keep the daily cash sheet, deposit slip and bank reference connected. This allows the reviewer to follow the money from the till to the bank without inventing an extra trading event.
Illustrative ordinary deposit
A Mangaluru retailer has ₹62,000 recorded and physically counted in its till. It deposits ₹50,000 into the business bank and retains ₹12,000 as change for the next day.
| Account | Debit ₹ | Credit ₹ |
|---|---|---|
| Business bank | 50,000 | — |
| Cash on hand | — | 50,000 |
| Total | 50,000 | 50,000 |
The cash ledger falls from ₹62,000 to ₹12,000, and the bank ledger rises by ₹50,000. Total recorded money remains ₹62,000 before any separate charges.
The entry contains no GST because the movement itself is not the original sale. Any tax associated with the underlying sales should already be dealt with through their own supported records, rather than calculated again on the deposit amount.
Match the counted cash and slip
Record the denomination count and depositor where useful. Compare the cash handed over, the deposit slip amount and the bank’s accepted amount. A difference should be investigated rather than hidden by altering earlier sales.
Suppose an illustrative slip says ₹50,000 but the bank confirms only ₹49,500. Check for a counting error, rejected note, bank adjustment or deposit mistake. The appropriate entry depends on what actually happened and who still holds the missing ₹500.
A shortage is not automatically bank charges. Obtain the relevant advice before recognising an expense or leaving an amount recoverable.
Deposits in transit need a visible trail
Cash may leave the premises on the last day of a month while the bank credit appears the next day. Follow a documented policy for money in transit and preserve evidence of custody and bank acceptance.
A controlled cash-in-transit account can be useful where the facts justify it: debit Transit and credit Cash when the supported handover occurs, then debit Bank and credit Transit when the deposit is confirmed.
Do not leave both Cash and Bank increased for the same money. Also avoid removing cash without identifying who holds it before the bank accepts it. The timing difference needs evidence, not simply a convenient date choice.
A deposit collected by an employee
If an employee carries cash to the bank, use a handover acknowledgement and deposit reference. The cash remains business money; handing it to the employee is not a travel expense or salary payment.
Where separate custody accounts are maintained, clear them when the bank deposit is confirmed. An old employee-cash balance may signal a missing slip, unrecorded deposit or unresolved shortage.
Review these custody balances promptly. A bank reconciliation can agree while money handed to an employee remains incorrectly classified elsewhere in the ledger.
Do not mix physical cash with digital collections
UPI and card receipts generally enter a bank or payment-settlement route, not the physical till. Including them in cash available for deposit can create an impossible cash balance.
For example, a day’s collections may total ₹80,000, but only ₹30,000 is notes and coins. Depositing ₹25,000 should be reconciled against that ₹30,000 physical component, while the ₹50,000 digital component follows its own bank or gateway records.
Use collection-channel totals consistently. A cashier’s sales report can combine channels for trading analysis while the cashbook needs the separate physical movement.
Fees and bank imports need separate handling
If the bank charges for cash handling, record the supported fee and any eligible tax component separately. The principal deposited should remain traceable to the slip.
Imported bank statements may create an unmatched receipt for the deposit. Match it to the existing contra voucher rather than recording another bank receipt against sales. Search the deposit date, amount and reference before adding a manual entry.
Where several tills are banked in one deposit, retain a breakdown showing each contribution. Where one till is banked in several deposits, retain the reverse link.
Close the cash proof daily
Opening cash plus cash receipts less supported cash payments and deposits should equal counted closing cash. Review negative cash balances, missing days and deposits larger than the supported available cash.
Check cash deposits against branch handovers
A central office may bank cash collected by several branches. Reconcile the deposit to the branches’ handover records and the entity’s cash-custody structure. The central bank receipt should not create another sale after each branch already recorded its collections.
Where branch books are separate, identify the reciprocal movement as well as the physical cash transfer. A single deposit slip can support several allocations, but their total must match the money accepted by the bank.
The correct deposit entry preserves the original source of money while showing its move into bank. When the cash sheet, deposit evidence and bank statement agree, the business can explain both its till balance and its bank receipt without overstating revenue.