Accounting for Cash Drawn from Bank

Hi, i have a question w.r.t. cash drawn from bank.

I withdrew 5000 cash from the ATM towards petty cash.

When i import my bank statement, how do i assign this 5000 to a Cash Account. Your suggested method is to handle this via an ‘Inter Account Transfer’ and delete the corresponding transaction in my bank statement. However i would like my imported bank statement entries to be untouched.

I guess it would be good to have the drop down show the list of ‘Cash Accounts’ so i can directly assign the bank transaction to a ‘Cash Account’. What do you say? Currently the ‘Cash Accounts’ do not show up in the drop downs.

One thing i could do is create a ‘New Liability Account’ and move the cash drawn here. Then i go to a Cash Accounts and do a Receive Money into the Cash Account from this ‘New Liability Account’. These two entries balance each other.

Is this correct? Or is there a workaround here?

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This is correct, however your “new liability account” is the same as the “inter account transfer”.

Am unsure where you get the “delete the corresponding transaction in my bank statement” from as this is incorrect.

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When i import my bank statement it shows an entry for 5000 (ATM cash withdrawal). Then when i do an ‘inter account transfer’, the amount of 5000 is reflected twice. Once in the ‘Cash Account’ and once in the imported bank statement entry. So i need to delete the one in the imported bank statement.

I hope i’ve been able to explain this correctly?

Ok, you either do an import bank statement or an Inter Account Transfer but not both.

If you wanting to use the import bank statement then the bank rule needs to use a “transaction clearing” account and you also need a Cash Account - Receive Money using the same “transaction clearing” account - so as you say “These two entries balance each other”.

@venky, while the use of a Transaction clearing account is financially correct, it requires the creation of that account and the manual entry of the “balancing” transaction in the petty cash account. It seems easier to just delete the imported transaction and use the built-in inter account transfer feature. I think there would be fewer overall clicks and entries. I do not see what benefit you gain from allowing your imported statement entries to be untouched. The import process is just a labor-saving mechanism. Why not save more labor by using the built-in inter account transfer feature?

@Tut , I’m charged a small fee + taxes when i withdraw cash from an ATM that belongs to another bank. In this case i withdrew 5000, but my bank charged me 5023.6 (20 charges + 3.6 (18% of 20 as taxes). When i import my bank statement i need to split the 5023.6 as shown in below image.

Deleting the 5000 entry would leave the other part of the transaction (23.6) without a context/reference for any future audit. Unfortunately we have many such transactions every year.

In above image, if we could have the ‘account drop down’ show ‘Cash Account’, we can just select the appropriate ‘Cash Account’ while reconciling the bank statement and avoid all the extra clicks.

With your more complete explanation, I would also do it the way you currently are. The difficulty with your suggestion is that bank rules cannot post transactions to control accounts (those with subsidiary ledgers). Cash on hand is a control account (with Petty cash as a subsidiary ledger). I don’t know if there is some technical reason for this limitation, only that it currently exists.