Cash Book PDF

CASHBOOKS
Recording Entries in the Cashbook

The cash books consist of the cash account and the bank account put together in one book. We
used to show these two accounts on different pages of the ledger. Now it is easier to put the two
sets of account columns together. This means that we can record all money received and paid out
on a particular date on the same page.
In the cash book, the debit column for cash is put next to the debit column for bank. The credit
column for cash is put next to the credit column for bank.
Exhibit 1 shows how a cash account and a bank account would appear if they had been kept
separately. In exhibit 2, they are shown as if the transactions had, instead, been kept in a cash book.
The bank column contains details of the payments made by cheque and direct transfer from the
bank account and of the money received and paid into the bank account. The bank will have a copy
of the accounts in its own books.
Periodically, or on request from the business, the bank sends a copy of the account in its books to
the business. This document is known as the bank statement. When the business receives the
bank statement, it checks it against the bank columns in its cash book to ensure that there are no
errors.
Exhibit 1.
Cash Account
2008 Details Kshs. 2008 Details Kshs.
Aug. Aug.
2 T Moore 33 8 Printing 20
5 K Charles 25 12 C Potts 19
15 F Hughes 37 28 Office stationary 25
30 H Howe 18 31 Bal. c/d 49
113 113
Sept.
1 Bal. b/d 49
Bank Account
2008 Details Kshs. 2008 Details Kshs.
Aug. Aug.
1 Capital 10,000 7 Rent 205
3 W P Ltd 244 12 F Small ltd 95
16 K Noone 408 26 K French 268
30 H Sanders 20 31 Bal. c/d 10, 104
10,672 10,672
Sept.
1 Bal. b/d 10,104
Exhibit 2.
This study source was downloaded by 100000892554210 from CourseHero.com on 10-19-2024 17:53:34 GMT -05:00
https://www.coursehero.com/file/62284016/CASH-BOOKpdf/
Cashbook
2008 Details Cash Bank 2008 Details Cash Bank
Aug. Kshs. Kshs. Aug. Kshs. Kshs.
1 Capital 10,000 7 Rent 205
2 T Moore 33 8 Printing 20
3 W P Ltd 244 12 C Potts 19
5 K Charles 25 12 F Small ltd 95
15 F Hughes 37 26 K French 268
16 K Noone 408 28 Office stationery 25
30 H Sanders 20 31 Balance c/d 49 10,104
30 H Howe 18 …… ……..
113 10,672 113 10,672
Sept. 1 Balance b/d 49 10,104
Cash Paid into the Bank

In exhibit 2, the payments into the bank were cheques received by the business. They have been
banked immediately upon receipt. We must now consider cash being paid into the bank.
1. Let`s look at the position when customers pay their accounts in cash and, later, a part of this
cash is paid into the bank. The receipt of the cash is debited to the cash column on the date
received, the credit entry being in the customer`s personal account. The cash banked has the
following effect needing action:
Effect Action
Asset of cash is decreased Credit the asset account, i.e. the cash account which is
represented by the cash column in the cash book.
Asset of bank is increased Debit the asset account, i.e. the bank account which is
represented by the bank column in the cash book.
A cash receipt of Kshs.100 from M Davies on 1 August 2008 which was followed by the
banking on 3 August of Kshs. 80 of these amount would appear in the cash book as follows:
Cashbook
Cash Bank Cash Bank
2008 Details Kshs. Kshs. 2008 Kshs. Kshs.
Aug Aug
1 M Davies 100 3 Bank 80
3 Cash 80
Details column shows entries against each item stating the name of the account in which
the completion of double entry has taken place. Against the cash payment of Kshs. 80
appears the word bank meaning that the debit of Kshs. 80 is to be found in the bank column,
and the opposite applies.
2. Where the whole of the cash received is banked immediately the receipt can be treated in
exactly the same manner as a cheque received, i.e. it can be entered directly into the bank
column.
3. If the business requires cash, it may withdraw cash from the bank. Assuming this is done by
use of a cheque, the business would write out a cheque to pay itself a certain amount in cash.
The bank will give cash in exchange for the cheque over the counter. It could also be done
using a cash card. The effect on the accounts is the same.
The twofold effect and the action required is:
Effect Action
Asset of bank is decreased Credit the asset account, i.e. the Bank column in the
Cash Book.
Asset of cash is increased Debit the asset account, i.e. the Cash column in the Cash
Book.
A withdrawal of Kshs.75 cash on 1 June 20X8 from the bank would appear in the Cash Book
as:
Cashbook
Cash Bank Cash Bank
2008 Details Kshs. Kshs. 2008 Kshs. Kshs.
June June
1 Bank 75 1 Cash 75
Both the debit and credit entries for this item are in the same book. When this happens it is
known as a contra item.
The use of Folio Columns

As you have already seen, the details column in an account contains the name of the account in
which the other part of the double entry has been entered. Anyone looking through the books
should, therefore, be able to find the other half of the double entry in the ledgers.
However, when many books are being used, just to mention the name of the other account may
not be enough information to find the other account quickly. More information is needed, and this
is given by using folio columns.
In each account and in each book being used, a folio column is added, always shown on the left of
the money columns. In this column, the name of the other book and the number of the page in the
other book where the other part of the double entry was made is stated against each and every
entry. So as to ensure that the double entry is completed, the folio column should only be filled in
when the double entry has been completed.
An entry for receipt of cash from C Kelly whose account was on page 45 of the Sales Ledger, and
the cash recorded on page 37 of the Cash Book, would have the following folio column entries:
- In the Cash Book, the folio column entry would be SL 45
- In the Sales Ledger, the folio column entry would be CB 37.
Note how each of the titles of the books is abbreviated so that it can fit into the space available in
the folio column. Each of any contra items (transfers between bank and cash) being shown on the
same page of the Cash Book would use the letter ‘C’ (for ‘contra’) in the folio column. There is
no need to also include a page number in this case.
The act of using one book as a means of entering transactions into the accounts, so as to perform
or complete the double entry, is known as posting. For example, you ‘post’ items from the Sales
Day Book to the appropriate accounts in the Sales Ledger and to the Sales Account and you ‘post’
items from the Cash Book to the appropriate accounts in the Sales Ledger.
The advantages of folio columns are that folio entries speed up the process of finding the other
side of the double entry in the ledgers.
Example of a Cash Book with Folio Columns

The following transactions are written up in the form of a Cash Book. The folio columns are filled
in as though all the double entries had been completed to other accounts.
Date Details Kshs.

2008 Sept.
1 Proprietor puts capital into a bank account for the business 10,940
2 Received cheque from M Boon. 315
4 Cash sales 802
6 Paid rent by cash 135
7 Banked Kshs. 50 of the cash held by the business. 50
15 Cash sales paid direct into the bank. 490
23 Paid cheque to S Wills. 277
29 Withdrew cash from bank for business use. 120
30 Paid wages in cash. 518
Cashbook (Pg. 1)
2008 Details Folio Cash Bank 2008 Details Folio Cash Bank
Sept. Kshs. Kshs. Sept. Kshs. Kshs.
1 Capital GL 1 10,94 6 Rent GL 65 135
2 M Boon SL 98 315 7 Bank ¢ 50
4 Sales GL 87 802 23 S Willis PL 23 277
7 Cash ¢ 50 29 Cash ¢ 120
15 Sales GL 87 490 30 Wages GL 39 518
29 Bank ¢ 120
30 Bal. c/d 219 11,398
922 922 11,975
Oct.
1 Bal. b/d 219 11,398
The abbreviations used in the folio column are: GL = General Ledger SL = Sales Ledger ¢
=Contra PL = Purchases Ledger
Cash Discounts
Businesses prefer it if their customers pay their accounts quickly. A business may accept a smaller
sum in full settlement if payment is made within a certain period of time. The amount of the
reduction of the sum to be paid is known as a ‘cash discount’. The term ‘cash discount’ thus refers
to the allowance given for quick payment. It is still called cash discount, even if the account is paid
by cheque or by direct transfer into the bank account.
The rate of cash discount is usually stated as a percentage. Full details of the percentage allowed,
and the period within which payment is to be made, are quoted on all sales documents by the seller.
A typical period during which discount may be allowed is one month from the date of the original
transaction.
Note: Cash discounts always appear in the profit and loss part of the Trading and Profit and Loss
Account. They are not part of the cost of goods sold. Nor are they a deduction from selling price.
Discounts Allowed and Discounts Received

A business man may have two types of discounts in its books. These are:
1. Discounts allowed:
Cash discounts allowed by a business to its customers when they pay their accounts quickly.
2. Discounts received:
Cash discounts received by a business from its suppliers when it pays what it owes them
quickly.
Example 1
W Clarke owed us Kshs.100. He pays us cash on 2 September 2008, which is within the time limit
applicable for a 5% cash discount. He pays Kshs. 100- Kshs. 5 = Kshs. 95 in full settlement of his
account.
Effect Action
1. Of cash: - Debit cash account, i.e. enter Kshs. 95 in debit
- Cash is increased by Kshs. 95. column of cash book.
- Assets of accounts receivable is decreased by Kshs. 95 - Credit W Clarke Kshs. 95
2. Of discounts: - Credit W Clarke Kshs.5
- Asset of accounts receivable is decreased by Kshs. 5 - Debit discounts allowed account Kshs. 5
(after the cash was paid there remained a balance of
Kshs. 5. As the account has been paid, this asset must
now be cancelled.)
- Expense of discounts allowed increased by Kshs. 5
Example 2
The business owed S Small Kshs.400. It pays him by cheque on 3 Sept. 2008, which is within the
time limit laid down by him for a 2.5 per cent cash discount. The business will pay Kshs. 400 -
Kshs. 10 = Kshs. 390 in full settlement of the account.
Effect Action
1. Of cheque: - Credit bank i.e. entry in the credit bank column
- Asset of bank is reduced by Kshs.390 for Kshs. 390
- Liability of accounts payable is reduced by Kshs. 390. - Debit S Small`s account Kshs.390
2. Of discounts: - Debit S Small`s account Kshs. 10
- Liability of accounts payable is reduced by Kshs. 10. - Credit discounts received account Kshs. 10
(After the cheque was paid, a balance of Kshs. 10
remained. As the account has been paid, the liability
must now be cancelled.)
- Revenue of discounts received increased by Kshs. 10
The entries made in the business`s books would be:
CASHBOOK (Pg. 32)
2008 Details Folio Cash
Bank 2008 Folio Cash Bank
Sept. Sept.
Kshs. Kshs. Kshs. Kshs.
2 W Clarke SL 12 95 3 S Small PL 75 390
DISCOUNTS RECEIVED (GL page 18)

2008 Details Folio Kshs. 2008 Details Folio Kshs.
Sept. Sept.
2 S Small PL 75 10
DISCOUNTS ALLOWED (GL page 17)

Sept. Sept.
2 W Clarke SL 12 5
General Ledger Page 17

W CLARKE
Sept. Sept.
1 Bal. b/d 100 2 Cash CB 32 95
….. 2 Discount GL 17 5
100 100
Purchases Ledger Page 75

S SMALL
Sept. Sept.
3 Bank CB 32 390 1 Bal. b/d 400
3 Discount GL 18 10 …..
400 400
Discounts Columns in Cash Book.

The discounts allowed accounts and the discount received accounts are in the general ledger along
with all the other revenue and expense accounts. It has already been stated that every effort should
be made to avoid too many entries in the general ledger. To avoid this, we add two columns for
discounts in the cash book.
An extra column is added on each side of the cash book in which the amounts of discounts are
entered. Discounts received are entered in the discounts column on the credit side of the cash book,
and discounts allowed in the discounts column on the debit side of the cash book.
The cash book entries for the two examples so far dealt with would be:
CASHBOOK (Page 32)

2008 Details Folio DA Cash Bank 2008 Folio DR Cash Bank
Sept. Sept.
Kshs. Kshs. Kshs. Kshs. Kshs. Kshs.
2 W Clarke SL 12 5 95 3 S Small PL 75 10 390
There is no alteration to the method of showing discounts in the personal accounts.
To Make Entries in the Discounts Accounts in the General Ledger

At the end of the period:
1. Total of discounts column on {receipts side of cash book}; enter on debit side of discounts
allowed account.
2. Total of discounts column on {payments side of cash book}; enter on credit side of discounts
received account
Worked Example:
2008 Kshs.
May
1 Balances brought down from April:
Cash balance 29
Bank balance 654
Accounts receivable accounts:
B King 120
N Campbell 280
D Shand 40
Accounts payable accounts:
U Barrow 60
A Allen 440
R Long 100
2 B King pays us by cheque, having deducted 2.5% cash discount Kshs. 3 117
8 We paid R Long`s account by cheque, deducting 5% cash discount Kshs. 5 95
11 We withdrew Kshs. 100 cash from the bank for business use 100
16 N Campbell pays us his account by cheque, deducting 2.5% discount Kshs. 7 273
25 We paid office expenses with cash 92
28 D Shand pays us in cash after having deducted 5% cash discount 38
29 We pay U Barrow by cheque less 5% cash discount Kshs. 3 57
30 We pay A Allen by cheque less 2.5% cash discount Kshs. 11 429
Folio numbers have been included in the solution to make the example more realistic.
CASHBOOK (Pg. 64)
2008 Details Folio DA Cash Bank 2008 Details Folio DR Cash Bank
May May
1 Bal. b/d 29 654 8 R Long PL 58 5 95
2 B King SL 13 3 117 11 ¢ 100
11 Bank ¢ 100 25 Off. Exp. GL 77 92
16 N Campbell SL 84 7 273 29 U Barrow PL 15 3 57
28 D Shand SL 91 2 38 30 A Allen PL 98 11 429
….. ….… 31 Bal. c/d 75 363
167 1,044 167 1,044
June
1 Bal. b/d 75 363
SALES LEDGER
B KING (Pg. 13)
May May
1 Bal. b/d 120 2 Bank CB 64 117
….. 2 Discount CB 64 3
120 120
N CAMPBELL (Pg. 84)

May May
1 Bal. b/d 280 28 Bank CB 64 273
280 280
D SHAND (Pg. 91)

May May
1 Bal. b/d 40 28 Cash CB 64 38
40 40
PURCHASES LEDGER
R LONG (Pg. 58)
May May
8 Bank CB 64 95 1 Bal. b/d 100
8 Discount CB 64 5 …..
100 100
U BARROW (Pg. 15)

May May
29 Bank CB 64 57 1 Bal. b/d 60
60 60
A ALLEN (Pg. 98)

May May
30 Bank CB 64 429 1 Bal. b/d 440
440 440
GENERAL LEDGER
DISCOUNTS ALLOWED (Pg. 75)
May May
30 Total for month CB 64 12
DISCOUNTS RECEIVED (Pg. 76)

May May
30 Total for CB 64 19
month
OFFICE EXPENSES (Pg. 77)

May May
25 Cash CB 64 92
Powered by TCPDF (www.tcpdf.org)

Cash Book PDF

Uploaded by

Copyright:

Available Formats

Cash Book PDF

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Cash Book PDF

Uploaded by

Copyright:

Available Formats

CASHBOOKS

Recording Entries in the Cashbook

Cash Paid into the Bank

The use of Folio Columns

Example of a Cash Book with Folio Columns

Date Details Kshs.

Discounts Allowed and Discounts Received

The entries made in the business`s books would be:

DISCOUNTS RECEIVED (GL page 18)

DISCOUNTS ALLOWED (GL page 17)

General Ledger Page 17

Purchases Ledger Page 75

Discounts Columns in Cash Book.

CASHBOOK (Page 32)

There is no alteration to the method of showing discounts in the personal accounts.

To Make Entries in the Discounts Accounts in the General Ledger

N CAMPBELL (Pg. 84)

D SHAND (Pg. 91)

U BARROW (Pg. 15)

A ALLEN (Pg. 98)

DISCOUNTS RECEIVED (Pg. 76)

OFFICE EXPENSES (Pg. 77)

You might also like