When dealing with cheques, the appropriate account to use depends on whether you are sending or receiving the cheque.
Sending a Cheque:
When you issue a cheque to pay for goods or services, you should record it through the Bank account. Writing a cheque reduces your bank account balance, so you will credit (decrease) your Bank account and debit (increase) the expense account, asset account, or accounts payable, depending on the nature of the transaction.
Receiving a Cheque:
When you receive a cheque from a customer or client, it is initially recorded in a temporary account, often called ‘Cheques Received.’ Once the cheque is deposited and cleared in your bank, you should then debit (increase) your Bank account and credit (increase) your accounts receivable or sales revenue, as appropriate.
In both scenarios, your Cash account—often representing cash on hand—is not directly impacted unless you withdraw or deposit cash. The Bank account is used for transactions that involve funds moving into or out of your bank.
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