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.

Cashiers 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,
Michael Celender

Comments for Asset Classification & Cashier's Check

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Answer
by: Anonymous

The warehouse is an asset so it will be debited here and the bank will be credited.

ASSET
by: IRFAN

WHEN YOU PAID THE FULL AMOUNT OF YOUR WAREHOUSE BY CHECK THEN YOUR ENTRY WILL BE LIKE THIS:

DEBIT CREDIT
WAREHOUSE BANK

YOUR WAREHOUSE IS AN ASSET, BECAUSE IT WOULD GIVE YOU BENEFITS FOR A LONG TIME, AND YOUR BANK VALUE DECREASES....

thanks

ASSET
by: Anonymous

When u paid in cash then your debit is credited but u have brought that asset for long run of your bussiness so it asset.

EATERY
by: Anonymous

its an asset, so this transaction affects your bank account it decreases and adds value to your assets. it would affect the liabilities account if bought on credit

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