Accounting for the Company's cash

It is convenient for a business to have a different General Ledger Cash account for any of its audit
reports. For example, a business would have a cash account for its main check account, a second cash
account for its payroll check account, and so on. For convenience, our explanations and discussions
assume that the corporation has only one check account with one general account called Cash.

If you note, the balances in the asset accounts are raised with the entry of the debit. As a result, anytime
a company collects money (currency, checks), the company debits the General Ledger Asset Account
Cash and credits another account using the day that the money was received (not the date the money is
deposited at its bank). For example, if the corporation gets $900 on Saturday, June 29, the debit to the
Cash account (and the credit to another account) would reflect the date of June 29, even if the money is
deposited on the bank account on Tuesday, July 2.

When a firm writes a check, the company's general account Cash is paid (and another account is
debited) using the date of the check. As a result, a check dated 29 June will be registered in the
company's records using the date of 29 June, even though the check clears (pays through) the
company's bank account one week later.

These transactions are normal events, which highlight two crucial points:

The unadjusted balance in the general account of the above-mentioned business Cash on June 30 is
expected to be different from the balance of the bank statement on June 30.

Mostly, neither the unadjusted balance of June 30 in the company's cash account nor the unadjusted
balance of June 30 in the bank statement is the true amount of the company's cash. In any case, all
unadjusted balances would need to be adjusted in order to arrive at a real, corrected, adjusted cash
balance.