Cash in Transit

Cash in Transit

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Hi Guys,

Is it essential to show the cash in transit as part of the bank balance on the balance sheet?

i.e.

bank balance : 10000

cheques issued but not cashed : 1000

show bank on BS as 9000?

OR show bank as 10000 to keep consistent with bank statement and show the 1000 as part of creditors and when the transaction comes into the bank, you can clear with this accrual? I have historically kept consistency with the statement and always accrued the others. I know the net effect of the balance sheet is nothing anyway so is it literally a case of "there is more than one way to skin a cat?"

your advise would be appreciated!

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Euan's picture
By Euan MacLennan
18th Feb 2012 10:46

Have you never heard of a "bank reconciliation"?

The expression would not exist if the figure in the accounts always agreed with the figure on the bank statement.

By issuing cheques, you have acted to pay the creditor, so that liability must be reduced, and as it is no longer under your control when the balance on your bank account will be reduced, you must reduce that asset correspondingly.  And no - there are no two ways of skinning this cat.

The only exception to the above is if the cheques have been drawn, but not sent out.  In that case, if you know about it, you would not reduce the creditor or the bank account.

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By khalm0
19th Feb 2012 23:02

Many thanks, sounds about right. I will change my process going forward!

 

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