The bank column records money that passes through the business bank account, such as cheques, transfers, standing orders, direct debits and card receipts. The cash column records only notes and coins that physically enter or leave the till.
The distinction appears in almost every cash book question, and it is the skill behind entering receipts and payments with correct columns.
How do you decide the column?
Ask one question: did the money go through the bank account, or through the till? The way the customer or supplier delivered the payment decides the column, not where they were standing.
| Method | Column |
|---|---|
| Notes and coins | Cash |
| Cheque received or issued | Bank |
| Online transfer | Bank |
| Card payment | Bank |
| Standing order or direct debit | Bank |
| Bank charges or interest charged | Bank |
| Drawings taken as notes | Cash |
The side is then decided by the direction. Money in is a debit. Money out is a credit.
Worked example
Wira Bakery starts June with RM 300 cash and RM 2,000 in the bank.
- Sells goods for notes RM 180.
- A customer pays RM 95 by card.
- Pays rent by standing order RM 500.
- Pays the delivery driver RM 60 from the till.
- A customer pays RM 230 by online transfer.
- Buys flour and pays by cheque RM 410.
- The owner takes RM 100 from the till as drawings.
- The bank charges RM 12 for the month.
Step 1, classify each item. Items 1, 4 and 7 are cash. Items 2, 3, 5, 6 and 8 are bank.
Step 2, place each on its side. Items 1, 2 and 5 are receipts (debit). Items 3, 4, 6, 7 and 8 are payments (credit).
Step 3, total the columns.
| Cash Dr | Cash Cr | Bank Dr | Bank Cr | |
|---|---|---|---|---|
| Opening balances | 300 | 2,000 | ||
| 1 Sales (notes) | 180 | |||
| 2 Card receipt | 95 | |||
| 3 Rent | 500 | |||
| 4 Driver | 60 | |||
| 5 Transfer | 230 | |||
| 6 Flour | 410 | |||
| 7 Drawings | 100 | |||
| 8 Bank charges | 12 | |||
| Totals | 480 | 160 | 2,325 | 922 |
Step 4, balance. Cash: 480 − 160 = RM 320 debit balance. Bank: 2,325 − 922 = RM 1,403 debit balance.
Second check: the opening total was 300 + 2,000 = 2,300. Receipts were 180 + 95 + 230 = 505, and payments were 500 + 60 + 410 + 100 + 12 = 1,082. So 2,300 + 505 − 1,082 = 1,723, which equals 320 + 1,403.
The mistake to watch for
The usual slip is to record the card receipt as cash because the customer paid in the shop.
Mistaken entry: Cash debit 95 for the card payment.
The cash column would show RM 95 that is not in the till, so a physical cash count would be short by RM 95, while the bank column would miss RM 95 that the bank really holds.
The correction is to ask “would I find this money in the till drawer?” A card payment is never in the till drawer. It is in the bank.
Check yourself
1. Decide the column and side: a customer pays RM 75 by online transfer.
Show answer
Bank column, debit side. It is a receipt through the bank account.
2. Decide the column and side: the owner takes RM 200 in notes from the till for personal use.
Show answer
Cash column, credit side, as drawings. Notes left the till, so it is a cash payment.
3. A cash book shows bank debit RM 640 and bank credit RM 410 before the balance. What is the bank balance?
Show answer
640 − 410 = RM 230 debit balance. It is an asset, so the bank balance is brought down on the debit side.
Where this leads next
The next step is what happens when cash is paid into the bank, which is a special case covered in recording a contra entry. You can also review the module route in cash books and petty cash.
If the column decision still feels uncertain when several payment methods appear in one question, our teachers can work through it in online one-to-one Accounting tuition.