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J.
C CHANDISINGH SECONDARY SCHOOL GRADE 10

PRINCIPLES OF ACCOUNTS HANDOUT
BOOK OF ORIGINAL ENTRY
Cash and credit transactions

Cash transactions occur when payment is received or made when the transaction takes place. This
includes the use of a cheque, a credit card and debit cards.
A credit transaction is one where payment is to be made some time in the future, after the
transaction.
Cash and trade discounts

A trade discount is given by suppliers to other businesses (wholesalers) to encourage trade. One
example of this would be a trade discount for bulk purchases.
A cash discount is given to encourage prompt payment, but cash discount is deducted when payment
is made.
Note: cash discount is always calculated after trade discount had been deducted.
Discount allowed and discount received

Discounts Allowed is a reduction from the amount due given to customers who pay their accounts
within the time allowed.
Discounts Received is a deduction from the amount due given to a business by a supplier when their
account is paid before the time allowed has elapsed.
Cash Book
The Cash Book is used to record the receipt and payment of money by the business in the form
of cash, or through the business bank account. It contains the cash and bank accounts.
-Cash and Bank Receipts

Types of Transactions Recorded:
Cash product sales / fees
Cash collected on customer accounts
Any other receipt (source) of cash
-Cash and Bank Payments
Types of Transactions Recorded:
Cash paid for expenses
Cash payments to our suppliers on account
Cash purchase of supplies
Any other cash payment
The following sets out information about the most important cash documents which are used to
prepare cash books.
Cash transactions
Source Explanation Entry required
document in cash account
Cash register Provide evidence of cash sales (including the
tapes or till receipt of coins, notes, cheque, debit card
rolls payments and credit card payments)
Receipts Copy of cash A hand written cash receipt is occasionally Debit the cash
receipt used as evidence that cash has been paid to a account
business (for example, cash received from a
credit customer)
Cash receipts Provide evidence that a payment has been
or vouchers made (for example, payments for an expense).
Payments Usually the receipt is in the form of a printed Credit the cash
cash register receipt, but it could be a account
hand-written document.
Bank transactions
Source Explanation Entry required
document in bank account
Paying-in-slip Provides evidence that cash (coins, notes,
counterfoils cheques, etc) have been paid into a business’s
bank account.
Receipts Bank Provide evidence that money has been Debit the bank
statements transferred directly into the business’s bank account
account (for example, by a customer settling
their account using an automated banking
process)
Payments Cheque Record details of payments made by the
counterfoils business by cheque usually to suppliers and for
expenses. Credit the bank
Bank Record amounts withdrawn from the current account
statements account for bank charges (including interest on
overdrafts) and for direct debit and standing
order payments
Format for Two Column Cash Book

NAME OF BUSINESS
Debit side (Dr) or Receipts Cash Book Credit side (Cr) or Payments pg#
Date Details folio Cash Bank Date Details folio Cash Bank
Example
On 1 September 2018, a business had cash in hand of $740 and cash at bank of $7 280.
The following source documents are available.
Date Source Document Transaction

Sept 5 Cheque counterfoil Payment of account payable, G Lee, $1 420.
Sept 8 Till roll Cash sales totalling $1 580.
Sept 11 Cash receipt Payment of general expenses of $110 in cash.
Sept 14 Paying-in slip counterfoil Transfer of $1 400 cash to the bank account.
Sept 21 Bank statement Bank charges for the month totalling $180.
Sept 28 Paying-in slip counterfoil Cheque from an account receivable, T Evans, $3 170.
NAME OF BUSINESS
Debit side (Dr) or Receipts Cash Book Credit side (Cr) or Payments pg#7
Date Details/ folio Cash Bank Date Details/ folio Cash Bank
Particulars Particulars
$ $ $ $
Sept 1 Balances 740 7280 Sept 5 G Lee PL 4 1 420

Sept 8 Sales GL9 1580 Sept 11 General exp. GL 6 110
Sept 14 Cash C 1400 Sept 14 Bank C 1400
ept 28 T Evan SL8 3170 Sept 21 Bank charges GL3 180
Sept 30 Balances c/d 810 10250
2320 11850 2320 11850
Sept 30 Balance b/d 810 10250
Notes:
- The cash column is always before the bank column.
- The cash book has a ‘double role’: it is a book of original entry (the first record of money
transactions with information extracted from source documents) and it is also part of the
double-entry system because it replaces the separate cash and bank accounts that would
otherwise have been found in the general ledger.
- The folio references follow the same pattern as Purchases and Sales Day Book. The cash
book has a page number and the reference CB7 would be used by the posted entries in
thee ledgers.
- The folio reference ‘C’ is used for entries between the cash and bank accounts (that is,
paying money into the bank account – as in the example – or taking cash from the bank).
C stands for contra entry.
- The cash book is balanced off at the end of the month

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J.

C CHANDISINGH SECONDARY SCHOOL GRADE 10

BOOK OF ORIGINAL ENTRY

Cash and credit transactions

Cash and trade discounts

Discount allowed and discount received

-Cash and Bank Receipts

Format for Two Column Cash Book

Date Source Document Transaction

Sept 1 Balances 740 7280 Sept 5 G Lee PL 4 1 420

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