StopLearnStopLearnA cash book is a book of account for recording cash receipts and cash payments. A cash book is one of the most important books of account. It is used only for recording cash transaction. A cash book, apart from the ledger is also a book of original entry.
When making entries in the cash book, the following rules should be followed:
There are three types of Cash Book
We shall discuss each of these in detail:
The single Column Cash Book is drawn as follows: The single cash book has only a single column on the debit side for cash receipts and another on the credit side for cash payments.
| Date | Particulars | Folio | Amount | Date | Particulars | Folio | Amount | ||
It can be seen that Cash Book is divided into two equal parts, namely: the Debit side and the Credit side.
An Example is given below:
Mr. Akubo commenced business as a petty trade in Lagos, on 1st of March, 2011 with N8000 in cash. During the month, the following transactions took place:
| ₦ | ||||||
| 1 | Mar. | Bought office furniture | 400.00 | |||
| 3 | Mar. | Bought assorted goods for sale | 2000.00 | |||
| 5 | Mar. | Bought postage stamps | 10.00 | |||
| 7 | Mar. | Sold goods for cash | 80.00 | |||
| 8 | Mar. | Paid for cleaning materials | 10.00 | |||
| 10 | Mar. | Received cash from Danladi Abubakar | 50.00 | |||
| 14 | Mar. | Paid Adewale Adewunmi | 90.00 | |||
| 16 | Mar. | Bought Stationery for cash | 5.00 | |||
| 18 | Mar. | Bought sundry articles for resale | 500.00 | |||
| 20 | Mar. | Received cash from Mallam Lamido | 100.00 | |||
| 22 | Mar. | Cash Sales | 50.00 | |||
| 24 | Mar. | Paid Jemima Johnson Cash | 100.00 | |||
| 28 | Mar. | Paid wages to assistant | 100.00 | |||
| 30 | Mar. | Paid rent | 50.00 | |||
You are required to post the above entries to the cash book.
Solution
The Cash Book of Mr. Akubo will be as follows:
| DR | CR | |||||||||
| Date | Particulars | Folio | Amount | Date | Particulars | Folio | Amount | |||
| 01-Mar | Capital | L.1 | 8,000.00 | 01-Mar | Furniture | L.2 | 400 | |||
| 07-Mar | Sales | L.5 | 80.00 | 03-Mar | Purchases | L.3 | 2,000.00 | |||
| 10-Mar | Danladi Abubakar | L.7 | 50.00 | 03-Mar | Postage Stamps | L.4 | 10.00 | |||
| 20-Mar | Lamido | L.10 | 100.00 | 08-Mar | Cleaning Materials | L6 | 10.00 | |||
| 22-Mar | Sales | L.5 | 50.00 | 14-Mar | Adewale Adewunmi | L.8 | 90.00 | |||
| 16-Mar | Stationery | L.9 | 5.00 | |||||||
| 18-Mar | Purchases | L.3 | 500.00 | |||||||
| 24-Mar | Jemima Johnson | L.11 | 100.00 | |||||||
| 28-Mar | Wages | L.12 | 100.00 | |||||||
| 30-Mar | Rent | L.13 | 50.00 | |||||||
| Balance | c/d | 5,015.00 | ||||||||
| 8,280.00 | 8,280.00 | |||||||||
| 01-Apr | Balance | b/d | 5,015.00 | |||||||
A two-column cash book is used for recording a combination of bank and cash transactions. It has one column for each of cash and bank transactions on both debit and credit sides. It is drawn as follows:
| DR | CR | ||||||||||
| Date | Particulars | Folio | Cash | Bank | Date | Particulars | Folio | Cash | Bank | ||
Sometimes money is taken from the bank to a cash box in an office or shop. At other times, cash is taken from the office or shop and paid into the bank. Such transfer is called Contra Entry. They must be recorded in book accounts: cash and Bank accounts. Contra Entry is denoted with ‘cc’. The word ‘Contra’ is a Latin word which means ‘opposite’
For example, when money is transferred from the cash box in an office, the bank receives the money, and is therefore debited. The cash account which gives the money, must also be credited.
Example:
Enter the following transactions in a double-column cash book of Olorunfemi Enterprises from the following particulars:
| ₦ | |||
| May-01 | Cash in office | 260.00 | |
| May-01 | Cash at Bank | 1,800.00 | |
| May-03 | Received bank cheque from R. Yomi | 160.00 | |
| May-05 | Cash Sales to date | 500.00 | |
| May-06 | Paid cash into bank | 650.00 | |
| May-09 | Paid R. Yomi by cheque | 140.00 | |
| May-12 | Paid rent by cheque | 100.00 | |
| May-14 | Bought Stationery by cash | 100.00 | |
| May-17 | Withdraw cash from bank to office | 400.00 | |
| May-18 | Purchase goods for cash | 160.00 | |
| May-29 | Cash sales to date | 600.00 | |
| May-30 | Paid cash to the bank | 150.00 | |
| May-31 | Paid wages in cash | 100.00 | |
| May-31 | Bank desired charges | 50.00 | |
Olorunfemi Enterprises Cash Book for May
| DR | CR | ||||||||||
| Date | Particulars | Folio | Cash | Bank | Date | Particulars | Folio | Cash | Bank | ||
| May-01 | Balance | b/d | 260 | 1,800 | May-06 | Bank | Cc | 650 | |||
| May-03 | R. Yomi | 160 | May-09 | R. Yomi | 140 | ||||||
| May-05 | Sales | 500 | May-12 | Rent | 100 | ||||||
| May-06 | Cash | cc | 650 | May-14 | Stationery | 100 | |||||
| May-17 | Bank | cc | 400 | May-17 | Cash | cc | 400 | ||||
| May-29 | Sales | 600 | May-18 | Purchases | 160 | ||||||
| May-30 | Cash | cc | 150 | May-30 | Bank | cc | 150 | ||||
| May-31 | Wages | 100 | |||||||||
| May-31 | Bank Charges | 50 | |||||||||
| Balance | c/d | 600 | 2,070 | ||||||||
| 1,760 | 2,760 | 1,760 | 2,760 | ||||||||
| Jun-01 | Balance | b/d | 600 | 2,070 | |||||||
The three column cash book is the same with the two-column cash book but with an additional column for discounts on both sides of the account.
| DR | CR | ||||||||||||
| Date | Particulars | Folio | Disct. Allowed | Cash | Bank | Date | Particulars | Folio | Disct. Received | Cash | Bank | ||
The Discount column in the debit side records discount allowed to customers by the organization while the credit side records discount received by the organization.
Example: Record the following transactions in a three column cash book.
| ₦ | |||
| Sept 1 | Cash in Hand | 500.00 | |
| Sept. 2 | Received cheque from Joe | 8,000.00 | |
| Sept. 2 | Allowed Joe Discount | 200.00 | |
| Sept. 4 | Drew Cheque for Peter | 2,200.00 | |
| Sept. 4 | Received discount from Peter | 400.00 | |
| Sept. 16 | Bought goods in cash | 250.00 | |
| Sept. 20 | Received cash from Evans | 4,000.00 | |
| Sept. 25 | Paid Cash to Udoh | 500.00 | |
| Sept. 30 | Drew cheque for trade expenses | 1,200.00 |
Solution:
| DR | CR | ||||||||||||
| Date | Particulars | Folio | Disct. Allwd | Cash | Bank | Date | Particulars | Folio | Discount Received | Cash | Bank | ||
| Sep-01 | Balance | b/d | 500 | Sep-04 | Peter | 400 | 2,200 | ||||||
| Sep-02 | Joe | 200 | 8,000 | Sep-16 | Purchases | 250 | |||||||
| Sep-20 | Evans | 4,000 | Sep-25 | Udoh | 500 | ||||||||
| Sep-30 | Expenses | 1,200 | |||||||||||
| Balance | c/d | 3,750 | 4,600 | ||||||||||
| 4,500 | 8,000 | 4,500 | 8,000 | ||||||||||
| Oct. 1 | Balance | b/d | 3,750 | 4,600 | |||||||||
| ₦ | |||
| June 1 | With Cash | 10,000.00 | |
| June 1 | Paid to Bank | 5,000.00 | |
| June 2 | Bought goods with cash | 3,000.00 | |
| June 10 | Received cash from Ebuka | 1,700.00 | |
| June 12 | Bought Office Furniture | 200.00 | |
| June 15 | Paid Mr Aloba Aloe | 340.00 | |
| Discount allowed by Aloba | 20.00 | ||
| June 20 | Paid Tete Dimka | 200.00 | |
You are required to prepare Madam Adule’s Cash Book as at 30th June.
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