When you deposit cash from the till into the firm’s bank account, the entry is:
Bank A/c ……… Dr. To Cash A/c
Bank goes up, cash goes down, and the total assets of the business do not move at all. Nothing has been earned or spent, because the money has only changed its address.
That base entry covers most deposits. What changes it is who put the money in and what the bank took out on the way. This guide sets out the entry, why it counts as a contra entry, and four variations where the credit side is not Cash at all.
Key Takeaways
- The base entry is Bank A/c debit, Cash A/c credit
- It is a contra entry, so in a two-column cash book it is not posted to the ledger again
- If a customer pays cash straight into your bank, the credit goes to that customer, not to Cash
- A deposit charge is a separate debit, and it does not reduce the cash you gave up
- Money introduced by the owner credits Capital, not Cash
What Is the Journal Entry for Cash Deposited in Bank?
Take an example. A pharmacy in Nashik deposits ₹47,800 from the till into its current account on a Tuesday afternoon.
| Particulars | Debit | Credit |
|---|---|---|
| Bank A/c | ₹47,800 | |
| To Cash A/c | ₹47,800 |
Two different rules produce that entry, which is worth knowing. Under the traditional classification ICAI teaches, a bank account is a personal account, so you debit the receiver. Cash is a real account, so you credit what goes out.
Under the modern approach both are simply assets, and the one increasing is debited while the one decreasing is credited. Either route lands on the same entry.
Neither the profit and loss account nor the balance sheet total changes. Two asset lines swap value between them, which is why this entry never affects profit.
Why Is It Called a Contra Entry?
A business that runs a two-column cash book records cash and bank side by side. A deposit touches both columns at once, and that is what makes it a contra entry.
ICAI’s study material puts it plainly. Where cash is sent to the bank, “the amount is recorded in the bank column on the receipts side and in cash column on payment side. Against such entries, the letter ‘C’ should be written in the L.F column”.
That “C” matters. It marks the entry as already complete, so it is not posted to the general ledger a second time. ICAI’s cash book notes describe the same movement as affecting both columns together.
Post it twice and your cash and bank balances both go wrong, in opposite directions, which is the sort of error a trial balance will not always catch.
The 4 Variations
The debit stays Bank in all four. What moves is the credit, and in one case a second debit appears. Each example below is illustrative, with invented figures.
1. A Plain Deposit From Your Own Till
This is the base case, and the only one of the four where the whole entry sits inside the cash book.
| Particulars | Debit | Credit |
|---|---|---|
| Bank A/c | ₹47,800 | |
| To Cash A/c | ₹47,800 |
Cash physically leaves the premises and lands in the account. Both legs sit inside the cash book, nothing is posted onward, and the entry is marked with a “C”.
Use this one when the money was already yours and already recorded as cash in hand.
2. A Customer Deposits Cash Straight Into Your Account
Here the cash never reaches your till. A hardware wholesaler is owed ₹18,600 by a contractor, who walks into a branch and pays it straight into the wholesaler’s account.
| Particulars | Debit | Credit |
|---|---|---|
| Bank A/c | ₹18,600 | |
| To Contractor A/c | ₹18,600 |
Crediting Cash here would be wrong twice over. The wholesaler never held that cash, so reducing the cash balance would understate it, and the contractor’s account would stay open even though the money has been paid.
This is not a contra entry either. Only one leg belongs to the cash book, so the credit posts to the contractor’s account in the ledger like any other receipt.
3. A Deposit That Carries a Bank Charge
Banks often charge for cash handling above a free limit, and the charge is deducted rather than billed later. Say ₹1,20,000 goes in and ₹236 comes off, leaving ₹1,19,764 credited.
| Particulars | Debit | Credit |
|---|---|---|
| Bank A/c | ₹1,19,764 | |
| Bank Charges A/c | ₹236 | |
| To Cash A/c | ₹1,20,000 |
Read the credit line carefully. You gave up ₹1,20,000 in cash, not ₹1,19,764, so that is what Cash is credited with. The shortfall is an expense, not a smaller deposit.
Bank Charges is a nominal account, so this one does reach the profit and loss account. In a two-column cash book the deposit itself is still recorded contra at the full ₹1,20,000, and the ₹236 goes separately in the bank column against Bank Charges.
The entry above treats the ₹236 as a single charge. Where the bank issues a tax invoice and you claim the credit, that debit splits into the fee and the GST on it, with only the fee reaching the expense.
4. The Owner Puts Personal Cash Into the Business Account
The proprietor of a printing unit deposits ₹2,50,000 of their own money into the firm’s account to fund a paper purchase.
| Particulars | Debit | Credit |
|---|---|---|
| Bank A/c | ₹2,50,000 | |
| To Capital A/c | ₹2,50,000 |
The business did not have this money before, so no cash balance falls. What rises is the owner’s claim on the business, and Capital is where that claim is recorded.
Treat it as a deposit from the till and two things break at once. Cash in hand shows a balance the till does not have, and the capital the owner has actually put in goes unrecorded.
What Is the Entry When You Withdraw Cash From the Bank?
The reverse movement uses the same logic with the legs swapped. A diagnostic lab draws ₹25,000 from the bank to hold as a float for the week.
| Particulars | Debit | Credit |
|---|---|---|
| Cash A/c | ₹25,000 | |
| To Bank A/c | ₹25,000 |
ICAI describes both directions in the same passage. Where cash is withdrawn for office use, the amount goes in the bank column on the payments side and the cash column on the receipts side. A deposit runs the other way.
Both are contra entries and both carry the “C”. The practical difference is in the paperwork. A deposit usually leaves a counterfoil, while a withdrawal tends to be reconstructed later from a statement. That is why the withdrawal is the one more often posted to the wrong date.
How to Check the Entry Is Right
Three questions settle almost every case, and they take longer to read than to apply.
- Did the money come out of your own till? If yes, credit Cash. If it came from a customer or the owner, credit them instead.
- Did the bank keep any of it? If the credited amount is smaller than the cash handed over, the difference is a charge and needs its own debit line.
- Do both legs sit in the cash book? If they do, mark it contra and stop. If one leg is a person or an expense, it posts to the ledger.
As an example of question two, suppose ₹60,000 goes in and the statement shows ₹59,882. Crediting Cash with ₹59,882 balances the entry, so nothing looks wrong, but ₹118 of cash has quietly vanished from the books. The correct treatment credits Cash with the full ₹60,000 and debits the ₹118 as a charge.
The deposit that clears on a different date is a separate problem, not an entry problem. Your books show it on the day you banked it. The statement shows it on the day it cleared. That gap is exactly what a bank reconciliation exists to explain.
Where the Entry Comes From in Practice
Most deposits start as counter sales, so the number you bank should tie back to what the till recorded that day.
That link is where errors usually begin. In the books we see, a deposit that cannot be tied to a day’s sales is almost always one reconstructed from a bank statement weeks later. By that point nobody remembers which day the shortfall belongs to.
Petpooja Invoice records every bill as it happens, so the day’s cash figure comes from the sales record rather than from counting backwards. Where the books are kept in Tally, our guide on POS to Tally sync covers how the entries carry across.
Conclusion
The entry itself is the easy part. Debit Bank, credit Cash, mark it contra, move on.
What decides the credit is a question about where the money came from, not about the deposit slip. Money from your own till credits Cash, a customer credits their own account, and the owner credits Capital. A bank charge adds a debit without changing what Cash gave up.
Get that habit right and the month-end reconciliation stops being an investigation. Every one of these entries also has to survive being looked at later, which is what the books of account requirement under the Companies Act, 2013 asks for.
For the wider set of entries a small business posts, our journal entries guide works through 25 of them. Petpooja’s billing software keeps the sales record those entries are built on.
Frequently Asked Questions
Bank A/c is debited and Cash A/c is credited by the same amount. Both are asset accounts, so the entry moves value between them without touching profit. In a two-column cash book it is recorded as a contra entry rather than posted to the ledger twice.
Yes, when the cash came from your own till. Both legs sit inside the cash book, so it is marked with a “C” and not posted onward. If the money came from a customer or the owner, only one leg is a cash book account, so it is an ordinary entry.
Debit Bank and credit that customer’s account. Do not credit Cash, because the money never entered your till. Crediting Cash would understate your cash balance and leave the customer showing as unpaid.
Credit Cash with the full amount you handed over, debit Bank with the amount actually credited, and debit Bank Charges with the difference. The charge is an expense that reaches the profit and loss account. It is worth reviewing at period end alongside the bad debts journal entry and other adjustments.
No. A plain deposit moves value between two asset accounts and leaves profit untouched. The only variation here that reaches profit is the one with a bank charge, and only the charge itself does so, not the deposit.
