When you have dealings with cash, you’ll definitely have the need to transfer physical cash to the bank on your bank account. The cash receipt is gaining an asset for sure on your balance sheet, but it’s what happens with it inside the group what matters.

The initial cash related entry may be something like this (a very simplistic one):

Dr Cash

Cr Revenue

So eventually you may have loads of cash physically at your premises. Since holding cash there may not be the safest place, you probably want to take it into the bank. Depositing the cash on your bank account is usually more useful provided you don’t have cash dealings of your own with suppliers, employees etc. In case you’re not the one taking money to the bank on your own, you will probably use a special service for this. How this usually looks like is that a service provider picks up the money and in 24 hours takes it to the bank. This however means that the cash isn’t actually cash for you and it isn’t yet also your bank deposit. It’s something that is called cash in transit. The accounting entry in such cases is following:

Dr Cash in transit

Cr Cash

The company still has an asset, but it is just on different line on the balance sheet. When this money reaches the bank account, a new entry is made and it’s the following:

Dr Bank account

Cr Cash in transit

And with this from cash we have it on the bank account both in reality and on balance sheet. Those entries are usually made on balance sheet date or when closing the financial year. Usually on everyday basis there is no need to go through such entries; however everything depends on the volumes of cash transactions and the type of company we are talking about. In case of considerable amounts of cash it makes sense to have some order in the accounts, whereas in case of insignificant and rare cash transactions such entries may be unneeded.