CHAPTER FIVE THE CASH BOOK CHAPTER OUTLINE 9 ee Purpose of the cash book Types of cash book ey ae “Main cash book “Petty Cash book te 5 Trade and cash discounts Posting of cash book to ledger aa Learning Objectives At the end of this chapter, the student should be able to: Explain the meaning of a cash book Identify and explain the source documents of acash book Identify the different types of cash book Explain the basic principles of posting transaction to the cash book Demonstrate how to extract information from a cash book to the ledger Explain the relationship among different columns of the cash book. Differentiate between trade and cash discounts. 335.1 PURPOSE OF THE CASH BOOK The cashbook is a unique subsidiary book as it serves dual purpose. Itis seen as a subsidiary book and equally a ledger account that forms an integral part of the double entry system. The cash book is used to record every transaction involving cash receipt or cash payment. Any transaction that involves immediate cash or cheque is recorded in the cash column or the bank column of the cash book. 5.2 TYPES OF CASH BOOK There are two basic types of cash book namely; 1. Main cash book 2. Petty cash book 5.3 MAIN CASH BOOK The main cash book can be differentiated by the nature of the transactions it is meant to accommodate. Consequent upon this, we have Single Column, ‘Two Column and Three Column cash books. The difference among these is the number of columns contained in the cash book as will be seen in the illustrations below. The general format of the main cash book remains the same except for the differences in the number of columns. Single column cash book This is the simplest form of cash book whenever transaction is done purely with cash. The page is divided into two halves. The left hand side is known as debit (Dr) side while the right hand side is known as credit (Cr) side. The basic principle is to debit every cash receipt and credit every cash payment or cash disbursement. The single column cash book may sometimes be called simple cash book Format of a simple cash book Dr DATE | PARTICULARS [FOLIO [AMOUNT [DATE | PARTICULARS | FOLIO al Cr ‘AMOUNT, ———__ 94 gration 5% acti , of January, 2011 is as follows: aewe's business transaction for the Month of ry, . 500,000 : Cash balance b/f pa ane _. ] Cash received from Happiness ONG 4: Purchased goods for cash By aaa 10 Bought stationery for cash Be on 12 Purchased goods for cash eae 13 Cash sales to date ee 15 Cash withdrawn oe 18 Cash sales to date A oO 22 Purchased goods for cash sh 25) Cash sales to date SOND 30 Paid wages in cash an 31 Paid rent in cash he above You are required to prepare a simple cash book of Mr Ekwe from the transactions. ee Simple Cash Book Solution 5.1 y y AMOUNT DATE“) PARTICULARS [FOLIO AMOUNT | DATE | PARTICULARS | FOLIO x So ‘000 | _Jan 4 | Purchases 180 on a 200,000 10 | Stationery 5000 Soi 65,000 12 | Purchases 45,000 re = 12,000 15 | Withdrawal to. 5 a 70,000 22 | Purchases op.000 25 Sales : So Wages Ts 31| Rent. ; 31 | Bal dd a hd 847,000 Feb1 Bal b/d 437,000 Points to note: : Date: This indicates the date of seleaie Particulars: This is a simple guide to the so expenditure. urce of income or cause of the 35Folio: A reference to where the transaction is further posted or where ¢ Corresponding entries can be found in the subsidiary book. Amount: The value of the transaction. TWO/THREE COLUMN CASH BOOK A cash book is referred to as two column or double column when it is ruled te contain columns for both cash and bank transactions while the three colum When the customers settle their debts and are allowed cash discounts, the cash discounts are listed in the discount allowed column, This is immediately. credited to the customer's account but the corresponding debit entry will remain until a specified period when the total of the discount allowed column will be posted to the debit side of the discount allowed account in the ledger. Again, when the suppliers’ debt is settled an these are listed in the discount received colu the suppliers account while the correspondi to the credit of discounts received account at id cash discounts are obtained, mn and immediately debited to ng credit entry would be posted specified interval. Illustration 5.2: The following transactions are listed in the books of John Bull Enterprises for the Month of June, 2010. N June 1 Cash balance 18,330 Cash at bank 306,240 3 Settled Abdulahi account of 640 by cheque after deducting 5% cash discount. 5 Cash sales to date paid into the bank 51,060 7 Received and banked cheque for 870 from Eze in settlement of his account of 900 10 Paid Mbachu N57, 500 by cheque and he allowed N250 cash discount 15, Cash sales paid into Bank 46,590 18 Ekene remitted cash of N490 after 36 See » cash discount 4 had deducted 4% cas i” witdrew cash from bank to office a . Bought good for cash Z 2) Cash sales to date ct id cash into bank au N500; and general expenses 130 allin cash ‘ash ions in a three-column ¢ ired to enter the above transactions In a u are require! e Fok of John Bull Enterprises. ae John Bull Enterprises’ Three Column Cash Boo! Gah | Bark Bark Date | Patialas | Fdio Discount ‘4 7 Dscourt | Cash : Date | Paticuars | Fdio a Bs : : En : 730 | x640 | kne3 | Abdilaii a aS ha} : 51,000 - = mo [a |can |© : . : 16,450 ; hase BD [Prd 20 Sass 7 K aL: 10 40 D7 |e _ sa ; 800 2B | Wags . Bk [© ; 7 wm |B Gn. |. ce | TEs | OB2 » 27. 1 7 penses, Sas 0) : - [ase [20.270 | 4 xO. a m2 [0% 2,600 346,052 Bal b/d Note: Contra-entries: a = il ' ither ithin the firm from el ner will be double entry of the same respectively. cash se transactions or nea sh till or vice versa. When oT fa transactions as noticed on 1 37Illustration 5.3 N 270,000 rd Enter the following transactions in the in a double column cash book of. Cash in hand ra a 0p ne Chiekwe, a sole trader. March 1. Cash at Bank oe 200, February, 2014. b bi's account : : P Se eater deducting 5% re ale aren N Byc te paid into ban! 7, J Cash balance in the Office safe 26,000 5 oo bet cheque of unt of 9,000 Cash balance at the bank 50,000 7 eee settlement of his acco! lowed 2 Cash sales to date 300,000 From Bee iGo 000 by cheque and who allow , id Hilary N 5 Received and banked cheque from Kenny 450,000 ‘10 Fels a 00 cash discount. 300,000 6 Paid cash into bank 100,000 les paid to bank er deducting 10 Paid Hilary by cheque 30,000 1a as oie aitted cash of NBO, 000 aft 12 Purchased goods for cash 200,000 19. saves discount. aa 13 Withdrew cash for Office use 50,000 cate cash for office use oe 14 Bought stationeries for cash 40,000 20. Bought goods for cash bina 20 Purchased goods for cash 100,000 21. eae Sales to date oe 25 Cash sales to date 60,000 31. cae wages by cash. 40, 28 Paid rent by cheque 35,000 31. re drent by cash 28 Paid wages in cash 15,000 a a Solution 5.3 Solution 5.4 ae Month of March, 2011 Chiekwe's Three Column Cash Book for Talo] Dee | Gah Pas Double Column Cash Book for the Month of February, 2014, om Tank | Date] Particulars! Received | N Date [Particulars] Fore Cash [Bank (my [Date Particulars [Folie | Cash (a ac) Partials | Folio] Disc. N N N 790,000 Feo far 573 —| 76.008 150.000 Feb aang pe tome : sabi oe : 4am) oo Mie. {Ome at 100,000 2 Cash sales] 300, TO Willary 30,000 Ba. Bd - Hillary co Renny — a CS ee re W055 = aaa = ae = Cash oe 100,000 fis Cash 7m 30,000 a 1 3000] 20 | cash a 13 Bank o 50,000 7 40,000 TOttonve 2.000 7 ISX 25 [Cash sas] 60,000 anes eieaaal ‘ 300,000] 21 | Purchases ma pa 77 Ce un | he ee |e 73 TWage 15,000 = 000 c i Sar am Taras T5TT Ran a aT] Ra a SE r TsO saoaeT : 7000 azo [Ta Bak | 31 [baa asm | aso [1057 March 1.Bal b/d 485,000 Bid 19,000 45.000, a0 0 ks 105 f 00. a TT iscount N10,0 z, Discou! Illustration 5.4 April T: Bal bd 247.000 200,000 = 10,000. You are required to record the transactions below in a three column cash Workings: March 3" 5/100 X 1 book of Tope and show the balance brought down as at 31“ March, 2011, . 38 a eae 39 eeAmount Paid = N190, 000. Illustration 5.5 Mr. Eneje commenced business on 1° January, 2009 transferring N720, 000 from his private current into a bank which he ha opened for the business. His transactions for the Month of January, 200: were as follows: JANUARY N 1. Bought goods on credit from Yemi 120,000 2. Withdrew cash from the bank for office use 18,000 3. Sold goods on credit to Dominic 150,000 4. Bought goods on credit from Benjamin 180,000 5. Sold goods to Okechukwu on credit 220,000 6. Paid rent by cash 2,500 7. Withdrew cash from Office till for personal use 3,000 8. Bought goods from Bolongo on credit 100,000 9. Goods returned by Dominic 17,000 10. Sold goods on credit to Anthony 140,000 11. Cash purchases from Ekpo 40,000 12. Goods returned to Yemi 8,200 13. Cost of goods taken for Private use 5,000 14. Goods returned by Okechukwu 20,000 15. Sold goods on credit (normal selling price N20,000) to Akin giving trade discount of 10% 16. Receiving cheque of N95,000 from Okechukwu after he had deducted cash discount 5% 17. Purchased second hand Car from Maza Maza motors by cheque 100,000 18. Paid cheque to Yemi in full settlement of his account 110,000 19. Cash sales to Taribo received by cash 25,000 20. Goods returned to Bolongo 5,000 21. Purchased good worth N70,000 on credit from Aminu ata trade discount of 10% Paid cash of N18,000 to Bolongo after deducting discount of 10% 22 23. Received cash from Dominic in full settlement of his account 130,000 24, Cheque received from Anthony 50,000 40 eee eee 80,000 5 Deposited cash into Bank account aoe 725. bel i cas! ee | fees 4 Be er bank to pay his son's schoo! 80,000 27. Withdr 28. Paid Benjamin by cheque i t ired: Write up the anor other subsidiary books) ree column cash book OLUTION 5.5 Mr. Eneje's b january, 2009. tak h Book for the Month of J clas | Foo | Osc cash ree Column Cash Boo ot one [aria recoved " Folio | Disc. nee ae Allowed | ¥ * N Boa ‘ + 720,000 an | Cash ® Capital 2 7,500 a oS 180,000 & i Bak - 3,000 = a5 7 | Baning x 40,000 Tred 25,000 iL ‘Purchases 100,000 - ator ee a2 Danie ; ta — 800 50,000 [18 | Yer = 18,000 Tarhony wom |_| oir 7 30,000 tah | bk a TE Sane 5000 S| Devan 150,000 28 | Benjemin am 594,000 a | Bal c/O "73,000 945,000 3,800 al 173, e ‘3,000 | 173,000 | 945,000 ra 164,500 594,000 Febyuary I, Balb7d 5.4 PETTY CASHBOOX. \t for small ecord and account for . ash book used to Fé sre not direct pas iat rede b cele Dai analytical in ere ve a reasook Hae =) ne anes) hence it is ruled seal aap re analysed into appropriate eal oe ies Seon ee sii ak each bearing areata belie mn: ane ofeash inflow to the petty cash book is 41 Ee EEE lethe imprest through the Petty cash voucher duly authorized, When the imprest or cash float reaches a pre-determined level, the petty cashier will apply for re-imbursement for an amount equal to the amount disbursed, Such application is supported with the petty cash vouchers, CONTROL: The available cash in the petty cash till plus the total disbursed as recorded in the petty cash vouchers must at all times equal the cash float, This makes it easier for the Management to monitor and effect control of the cash of the enterprise. Illustration 5.6 Nwakaego maintains an imprest of N60, 000. The re-imbursement is Continually made as soon as the cash float is exhausted within a specified period. During May, 2012 the following petty cash transactions took place: N 1May Cashier received float of 60, 000 The following payments were made: 2May Transport expenses 10, 000 3 Entertainment to visitors 2,500 4 Stationeries purchased 1,000 5 Vehicle repairs 4,500 6 Petrol 5,000 7 Repairs of security light 1,200 12 Driver's medical bill 5,000 i4 Stationery purchased 7,500 16 Transport expenses 2,500 28 Cleaner's medical bill 2,000 31 Re-imbursement was made You are required to Prepare an analytical petty cash book of Nwakaego as at 31 May, 2012. ———_———______ 2 \ SOLUTION 5.6 Nwakaego's Petty Cash book as at 31% May, 2012. PAYMENTS : r f = . ad cal [reed Pet Total [lransport) Entertain-] Stationery Repairs} i ; N ment N N F ' N N La 000] May Cash float | ae ie 2_| Transport 10.000 | 10,000 =a C 3. [Entertainment| 2.500 25 mn 4 _[ Stationery 1,000 _ i 4.500 - 5_| Repairs 4 | 5 6 | Petrol 5,000 a 7_[ Repairs 1.200) ml 12 | Medical Bill | 5.000 a5 14 _| Stationery 7.500 = 16 | Transport 2.500] 2,50 om fical bill | _ 2,000 i - a fa as 41.200 | 12,500 2,500. 8,500 | 5,700|_S. 41,200] 30 | Re- inybursement 30_| Bal cld 60.00 101,200 101.200 (60,000 | June} Bal b’d 1 D CASH DISCOUNTS : : oa There treed as student to realize the meaning and differences trade and cash discounts. Trade Discount: This is a discount given to a customer w' 0 buys goods in te tomer who buy: 1 This is a disc ivi arge quantity. It is aimed at encouraging the customer to buy more. Note ie invoice price re 'y that thi he same for all the customers whether the ains the same qua for the discount or not but the net selling price di ffers by the value of fy for the discou! trade discount enjoyed by different customers. 43 acs eatiso eee isUeusseues ecae eresrecorded in the books of accounts; rather it ends up at the point of sale or purchase. Itis merely used to calculate the net selling price of the goods, Cash Discount: This is also Called settlement discount. It is given to encourage prompt Payment from the debtors. It can be referred to as discount allowed if it IS on sales or discount received if it is on Purchases, Cash discount is recorded in the books of accounts when the Customer has fulfilled the terms of Payment specified in the invoice. The procedure is to post the totals of the analysis column to the debit side of the general ledger. Example, the total of stationery in illustration 5.6 above which is N8,500 is Posted to debit side of stationery account in the general ledger. This applies to other accounts. The method helps in decongesting the expenses account in the general ledger as only the totals will be Periodically posted, Illustration 5.7 Odumegwu Enterprises maintain an imprest of NSO, 000. The sole trader re- imburses the imprest as soon as. the imprest level drops to 10% or less of the float. During December, 2013 the following petty cash transactions took place, December, N ih Cash float given to Cashier 50,000 2. Bought Stationery for 3,000 8, Travelling expenses 1,000 ar Bought Postage stamp 2,500 oy Entertainment expenses 1,500 ‘y Repair of security lights 3,150 A Repair of vehicle 6,850 8. Purchase Of notebook 5,000 Be Transport expenses 2,500 10. Repair of furniture 350 11. Purchase of stationery 5,000 ‘12. Entertainment expenses 4,000 13, Medical bill expenses 6,000 30. Purchase of stationery 8,000 uir epare, show alar re-im) mi at 31% - ired: Pi showing balance and re-imbursement as Required: , December, 2013 a petty cash book with analysis column. ect i ion 5.7 | ee Odumegwu Enterprises Petty Cash Book — Rea Transport | Meaw =a —— joel Stationery [Postage [Evora | Repars | Repo ih # = 1,090 a Tao 6550 3a 5,003 jt E 350 5,009 a iI 7m = Taran zai — 3,159 S30 5.000 Tass a 7 2,020 7a TREE T | ape 95,550 7 T the total To post the transactions from the petty cash book to none rae &xpenses is posted to the debit side of the account i.e. tol Pee aise On any item is posted to debit side of that account. For cae of stationery stationery account which is 21, 000 is posted to the del scams oF eapenee @ccount in the general ledger. This applies to all other ac leadings.