20100810140858chapter 13- cash book

8/7/2019 20100810140858CHAPTER 13- CASH BOOK

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TOPIC 3

CHAPTER 13

CASH BOOK


2/23

DRAWING UP A CASH BOOK

The cash book consists of the: cashaccount and the bank account put

together in one book.In the cash book, the debit columnfor cash is put next to the debitcolumn for bank.

The credit column for cash is putnext to the credit column for bank.


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EgT-Account

20x8 20x8Aug 2 T Moore 33 Aug 8 Print 20 Aug 1 apital 1 Aug 7 ent 205

Aug 5 harles 25 Aug 12 Pott 19 Aug 3 Ltd 24 Aug 12 F Small 95

Aug 15 F ughes 37

ash ank

ash ank


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5/23

CASH PAID INTO THE BANK

The payment into the bank werecheques received by the business.


6/23

Eg 1

A cash receipt of RM100 from M Davies on 1August 20x8 which was followed by thebanking on 3 August of RM80 of this amount

would appear in the Cash Book as follows:

CASH

RM

BANK

RM

CASH

RM

BANK

RM

20X8

Aug 1 M Davies

Aug 3 Cash

100

80

20x8

Aug 3 Bank 80

CASH BOOK


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Effect Action

1. Asset ofcash is

decreased

Credit the asset account, i.e.

the cash account which is

represented by the cashcolumn in the cash book.

2. Asset ofbank is

increased

Debit the asset account, i.e.

the bank account which is

represented by the bank

column in the cash book.


8/23

Eg 2

A withdrawal of RM75 cash on June 20x8 from

the bank would appear in the Cash Book as:

CASH BOOKCASH

RM

BANK

RM

CASH

RM

BANK

RM

20X8

June 1 Bank 75

20x8

June 1 Cash 75

Both the debit and credit entries for thisitem are on the same book. When thishappens it is known as a contra item.


9/23

Effect Action

1. Asset ofbank is

decreased

Credit the asset account, i.e.

the bank column in the cash

book.

2. Asset ofcash is

increased

Debit the asset account, i.e.

the cash column in the cash

book.


10/23

THE USE OF FOLIO COLUMNS

Folio entries speed up the process offinding the other side of the double

entry in the ledgers.

The folio column should only be filled inwhen the double entry has been

completed.


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An entry would be:

In the cash book, the folio column isSL45

In the Sales Ledger, the folio column is

CB37


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o SL is Sales Ledger

o 45 is the page number.

o CB is Cash Book

o 37 is the page number


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Eg 3.

20x8 RM

Sept 1

Sept 2

Sept 4

Sept 6

Sept 7

Sept 15

Sept 23

Sept 29

Sept 30

Proprietor puts capital into a bank account for the

business.

Received cheque from M Boon.

Cash Sales

Paid rent by cash.

Banked RM50 of the cash held by the business

Cash sales paid direct into the bank.

Paid cheque to S Will

Withdrew cash from bank for business use

Paid wages in cash

10,940

315

802

135

50

490

277

120

518


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Cash Book20x8 Folio Cash Bank Folio Cash Bank

Sept 1 CapitalSept 2 M Boon

Sept 4 Sales

Sept 7 Cash

Sept 15 Sales

Sept 29 Bank

Oct 1 Bal

GL1SL98

GL87

C

GL87

C

b/d

802

120

922

219

10,940315

50

490

11,795

11,398

Sept 6 RentSept 7 Bank

Sept 23 S Wills

Sept 29 Cash

Sept 30 Wages

Sept 30 Bal

GL65C

PL23

C

GL39

c/d

13550

518

219

922

277

120

11,398

11,795


15/23

CASH DISCOUNT

Cash Discount refers to the allowancegiven forquick payment.

Therate of discount is usually statedas a percentage.

Note: Cash discount always appear in

the profit and loss part. They are notpart of the cost of good sold. Nor arethey a deduction from selling price.


16/23

DISCOUNT ALLOWED ANDDISCOUNT RECEIVED

Discount allowed: Cash discountallowed by a business to itscustomers when they pay theiraccounts quickly.

Discount received: Cash discountsreceived by a business from its

suppliers when it pays what it owesthem quickly.


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Eg 1 ..

Clarke owed us RM100. He pays us in cash on 2 September

20x8, which is within the time limit applicable for a 5 percent

cash discount. He pays RM100-RM5=RM95 in full settlement of

his account.

Effect Action

1. Ofcash:

Cash is increased by RM95

Asset ofdebtors is decreased by

RM95

Debit cash account, i.e. enter

RM95 in debit column ofCash

Book

Credit W Clarke RM952. Ofdiscounts:

Asset ofdebtors is decreased by

RM5

Expenses ofdiscounts allowed

increased by RM5

Credit Clarke RM5.

Debit discounts allowed account

RM5.


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Eg 2 ..

The business owed Small RM400. It pays him by cheque on 3

September 20x8, which is within the time limit laid down by

him for a 2 % cash discount. The business will pay

RM400-RM10= RM390 in full settlement of the account.

Effect Action

1. Ofcheque:

Asset ofbank is reduced by RM390.

Liability ofcreditors is reduced by

RM390

Credit bank, i.e. entry in the

credit bank column for RM390.

Debit S Smalls account RM390.

2. Ofdiscounts:

Liability ofcreditors is reduced by

RM10.

Revenues ofdiscounts received

increased by RM10.

Debit S Smalls account RM10.

Credit discounts received

account RM10.


19/23

Cash Book20x8 Folio Cash Bank Folio Cash Bank

Sept 2 Clarke SL12 95 Sept 3 S Small PL75 390


20/23

20x8 Folio RM Folio RM

Sept 2 S Small PL75 10

Discount Received (General Ledger)


Sept 2 W Clarke SL12 5

Discount Allowed (General Ledger)


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Sept 1 Balance b/d 100

100

Sept 2 Cash

Sept 2 Discount

CB 32

GL 17

95

5

100

Clarke (Sales Ledger)


Sept 3 Bank

Sept 3 Discount

CB32

GL18

390

10

400

Sept 1 Balance b/d 400

400

S Small (Purchases Ledger)


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BANK OVERDRAFTS

A business may borrow money from abank by means of a bank overdraft.

Means that the business is allowed to paymore out of its bank account than thetotal amount it has deposited in theaccount.

So the business owes money to the bank,therefore the account is a liability andthe balance becomes a credit one.


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End Chapter 13

20100810140858chapter 13- cash book

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