Asset Classification & Cashier's Check
by Jessica Serna
(Laredo, TX US)
Q: I bought a business warehouse. How do I classify this asset if I paid the full amount with a cashier's check?
A: This is a pretty simple transaction involving paying for one asset (warehouse) with another (cash from your bank account). The reason it might become confusing is because of the cashier's check.
A cashier's check is not the same as a personal or business check. The difference is that a cashier's check is secured or backed up by the bank's funds itself - in other words, if there isn't sufficient funds in your bank account the funds will come from the bank itself. It's just more secure than a regular check coming directly from your bank account. But at the end of the day the funds will (usually) still come from your bank account. In case you were wondering, one usually pays an additional fee to the issuing bank for this special check.
Example of a cashier's check
But what does a cashier's check mean in accountancy and for our accounting records?
Answer - it's exactly the same as a regular check - meaning that funds are coming out of your account to pay for something.
So the entry is the usual:Dr Warehouse (asset)
Cr Bank (asset)
If you have any difficulties with this I recommend to go through this lesson on purchasing an asset
And if you're still having trouble then take a look at the earlier accounting lessons and chapters on this site.
All the best,