Cash in Transit

Cash in Transit

It is to be noted that only equal inter company transaction are cancelled if the transaction are not equal than first the adjustment entry is passed and then transaction are cancelled.

Example of Cash in Transit

Pioneer & Co show a receivable of $ 80,000 from Soria & Co, while Soria & Co only show a balance of $ 60 payable to Pioneer. The investigation reveals that $ 20,000 has paid to the pioneer & co but not accounted for yet by the pioneer & Co.

1.      Journal Entry for cash in Transit

Pioneer Co will account for the following entry in its books of accounts.

Date	Particulars	Dr.	Cr.
	Cash	$ 20,000
	Receivable from Soria		$ 20,000

2.      Cancellation of Equal Transaction

Now the pioneer & Co shows a balance of $ 60,000 receivable from Soria and Soria & Co shows a balance of same amount payable to pioneer & co and therefore these both balances can be cancelled.

3.      Cash increase

It is important to note that cash in Pioneer Company will increase by $ 20,000 and the same will also be reflected in the group accounts.