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Cash Book Notes

The cash book is used to record cash and bank transactions. It contains two or three columns - the two column cash book has cash and bank columns, while the three column adds discounts allowed and received. Transactions are recorded from source documents like receipts and bank statements. The cash and bank accounts are balanced separately at the end of the period, with discounts columns only totaled. Contra entries record transfers between cash and bank within the cash book itself.

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Ronaldo Ghany
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130 views

Cash Book Notes

The cash book is used to record cash and bank transactions. It contains two or three columns - the two column cash book has cash and bank columns, while the three column adds discounts allowed and received. Transactions are recorded from source documents like receipts and bank statements. The cash and bank accounts are balanced separately at the end of the period, with discounts columns only totaled. Contra entries record transfers between cash and bank within the cash book itself.

Uploaded by

Ronaldo Ghany
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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CASH BOOK

What is a Cash Book?


The two column cash book is simply two ledger accounts placed side by side for convenience.
That is the cash account and the bank account which are most frequently used.
The three column cash book includes discounts allowed and discounts received columns.
Source document
The original documents that are used to make entries in the cash book are:
1. Cheques
2. Receipts
3. Statements
Format of the Cash Book 2 Column and 3 Column

Mr. Smith
2 Column Cash Book
Date Details F Cash Bank Date Details F Cash Bank
2019 $ $ 2019 $ $
May 1 Bal b/f 1 000 500 May 2 Purchases PL 1 000
May 5 Sales GL 500 May 10 Wages GL 300
May 6 B. Thomas SL 2 000 May 15 Electricity GL 200
May 21 A.Bob PL 100
May 31 Bal c/d 1 100 1 300
1 500 2 500 1 500 2 500

2019
June 1 Bal b/f 1 100 1 300

Mr. Smith
3 Column Cash Book
Date Details F Dis. All’d Cash Bank Date Details F Dis. Cash Bank
Rec’d
2019 $ $ $ 2019 $ $ $
May 1 Bal b/f 1 000 500 May 2 Purchases PL 1 000
May 5 Sales GL 500 May 10 Wages GL 300
May 7 D. Lucy SL 20 580 May 12 C. Dorris & PL 15 185
Co.
May 8 B. SL 2 000 May 15 Electricity GL 200
Thomas
May 11 S. Fraser SL 30 330 May 21 A.Bob PL 100
May 25 Bank C 400 May 23 G. Hunt PL 12 160
May 25 Cash C 400
May 31 Bal c/d 1 645 1 320
50 2 230 3 080 27 2 230 3 080
2019 Bal b/f 1 645 1 320
Contra Entry
A contra entry is one in which the entire double entry is done in the cash book, because the two
accounts involved are cash and bank. This occurs when the firm:
- Deposits cash into the bank ( dr. Bank, cr. Cash )
- Withdraws cash from the bank ( dr. Cash, cr. Bank )
Contra entries are identified by ‘C’ in the folio column.
Discounts Allowed
Cash discounts allowed by a business to its customers when they pay their accounts quickly.
Discounts Received
Cash discounts received by a business from its suppliers when it pays their accounts quickly.
Balancing the Cash Book
The two accounts must be balanced separately:
1. The cash account always has an opening and closing debit balance.
2. The bank account can have either a credit or a debit opening and closing balance. A debit
balance means that the business has money in the bank. ​A credit balance​ means that
there is a ​bank overdraft​.
NOTE: THE DISCOUNTS COLUMNS ARE NOT BALANCED, ONLY FIND THE
TOTALS.
Bank Overdraft
A bank overdraft is a type of bank loan whereby the bank allows the business man to withdraw
more money than he has deposited into his account. This means that the business owes the bank.
It is represented as a current liability on the balance sheet.
Posting the cash book to the ledger
1. For each debit entry in the cash book a corresponding credit entry is made in the ledger
account.
2. For each credit entry in the cash book a corresponding debit entry is made in the ledger
account.
3. Contra entries would not be posted in the ledger because the entire double entry has been
done in the cash book.

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