Cash account

This discussion explains how to account for old, demonetised currency notes that have lost their value. The recommended accounting treatment is to debit the loss to the Profit and Loss account and credit the Cash account. While you can name the ledger account as 'demonetisation loss', it ultimately impacts the P&L. Importantly, this loss is generally not tax-deductible as a business expense if the notes weren't exchanged within the government's stipulated timeframe.