Home > Accounting Entries > Assets > Financial Assets > Cash and Bank Balances
Definition:
Cash and Bank balances are pertaining to an entities financial liquidity. It can liquid cash available in different business locations or it can be in form of money held in bank accounts. Any balance held with original maturity of three months or less is term as a part of Cash and Cash Quivalents (or Cash and Bank Balances).
Term deposits with original maturity of three months or less are termed as Cash and Bank balances. Interest income on such balances are accounted as Accured Interest Receivable and reported under Other Financial Assets.
Accounting Entries:
Recognition of Cash Withdrawal from Bank:
Cash A/c DR
Bank A/c CR
Amount: Amount of cash withdrawn from Bank.
Term deposit created in a Bank:
Short term deposits A/c DR
Cash/Bank A/c CR
Amount: Principal value of short term deposits created.
Accrual of interest receivable on the deposit:
Accrued interest receivable A/c DR
Interest income A/c CR
Amount: Interest accrual computed as Principal value * Rate of interest * Number of days from last interest date / Day count convention.
Realisation or Maturity of Term Deposit:
Cash/Bank A/c DR
Short term deposits A/c CR
Accrued interest receivable A/c CR
Amount: Payments received from realisation/maturity of term deposits.