Received Cash On Account & For Cash

It is possible that a company received Cash from its customers for the goods sold to them or it received cash from banks or other financial institutions on account or credit basis for running the business or for other business funding‘s purposes.

When Cash is received For Cash

When Cash is received , it means we received it either from bank or any other parties. In that case, the Accounting Journal Entry to be record in the Cash Book is shown below:

                                                   Cash a/c  XXX

                                                                 Bank / Other Party’s Name  XXX

                                                 (Cash Received From Bank or Other Party)

When Cash is received from a customer, then it is either a direct revenue (Sales) or indirect revenue like Rent Received, Commission received, etc. The journal entry is to record in the cash book of company is shown below:

                                                Cash a/c  XXX

                                                              Sales / Rent Received account  XXX

                                         (Amount of Revenue Received From Customer / Client)

 

In that case, we debit cash account and credit Accounts Receivable / Debtors Account to whom the business sold goods on credit or account. The Journal entry is given below:

                                                        Cash a/c  XXX

                                                                    Accounts Receivable a/c  XXX

                                                     (Cash Received From Customers)

When Cash Received On Account

When cash is received on account, it means that the business borrows funds from banks or other financial institutions and it creates either Current Liability or Long-Term Liability. The entry would be as shown below:

                                                     Cash a/c  XXX

                                                                  Bank Loan a/c  XXX

                                        (Liability is Created by obtaining Loan from Bank)

 

If this cash is deposited into the bank account of the company, then the entry should be as follows:

                                                 Bank a/c  XXX

                                                                 Bank Loan  XXX

                                        (Taking bank Loan by depositing into the Bank Account)