STUDENTS EDITION ON CASHBOOK

1. Started a business with Ksh. 15,300 in cash and 8, 200 in bank.

DATE DETAILS F CASH BANK DATE DETAILS F CASH BANK

Capital 15,300 8,200

2. Dagoreti Enterprises had the following balances, cash in hand Ksh. 15,300 and
Ksh. 8, 200 in bank.

DATE DETAILS F CASH BANK DATE DETAILS F CASH BANK

Bal b/d 15,300 8,200

3. Started a business with Ksh. 15,300 in cash and a bank overdraft of Ksh 8, 200.

DATE DETAILS F CASH BANK DATE DETAILS F CASH BANK

Capital 15,300 Capital 8,200

4. Harrison, a debtor settled his account of Ksh. 18,000 by issuing a cheque of Ksh.
13,400 and the rest by cheque.

DATE DETAILS F CASH BANK DATE DETAILS F CASH BANK

Harrison 4,600 13,400

5. Paid Wangila, a creditor Ksh. 94,000 by cheque in full settlement of his account
after deducting 6% cash discount.
Interpretation: ALL monies owed to Wangila was paid. (In full settlement). But this payment was
received after the discount. So Ksh. 94,000 is the amount in the face of the cheque and equals to
94%. So one is required to calculate discount received.

PREPARED BY: TOBIAS YOGO

GENDIA HIGH SCHOOL
DATE DETAILS F DISC. CASH BANK DATE DETAILS F DISC. CASH BANK
ALL. RCVD
Wangila 6000 94,000

6. Received a cheque for Ksh. 58,800 from Wetu after allowing her a cash discount
of Ksh. 1,200.
Interpretation: what was received? Cheque of Ksh.58, 800…was the discount awarded already?
Yes…of Ksh. 1,200

DATE DETAILS F DISC. CASH BANK DATE DETAILS F DISC. CASH BANK
ALL. RCVD
Wetu 1,200 58,800

7. Anyango, a debtor paid her account of Ksh. 75,000 by cheque less 10% cash
discount.
Interpretation: what Anyango needs to pay, Ksh. 75,000/=. Did she pay all amount? No. she paid
less 10% cash discount. So 75,000 is 100% but Anyango paid 90%.

DATE DETAILS F DISC. CASH BANK DATE DETAILS F DISC. CASH BANK
ALL. RCVD
Anyango 7,500 67,500

8. Paid Furaha traders Ksh.29, 100 in cash in full settlement of their account less
3% cash discount.
Interpretation: in full settlement of their account less…means all has been paid, but amount paid is
less than the required, showing discount was awarded.

Amount owing to Furaha was X, amount paid is 29,100, but after paying 29,100(in full settlement),
No amount is now owed to Furaha. So 29,100 is 97%.

Discount is = X-29,100 = 3%

DATE DETAILS F DISC. CASH BANK DATE DETAILS F DISC. CASH BANK
ALL. RCVD
Furaha 900 29,100

9. Koko a debtor settled her account of Ksh 40,000 by cheque less 2.5% cash
discount.
Interpretation: ‘ settled’ means ‘fully paid’… account of means… amount to be paid, but not paid
as indicated .so, 40,000 ought to be paid in full but not paid as a discount was allowed.

DATE DETAILS F DISC. CASH BANK DATE DETAILS F DISC. CASH BANK
ALL. RCVD
Koko 1000 39,000

PREPARED BY: TOBIAS YOGO

GENDIA HIGH SCHOOL
 10. Dishonoured cheque.
If a cheque previously received as cash payment turns out to be dishonoured, then you need to
realise that the debtor still owes the money as at before the issue of the dishonoured cheque.
Consequently, the entries that were made on the receipt of the cheques ( i.e Dr.Cash book) need to
be nullified in order to get back to the position before the presentation of the dishonoured cheque.

This is done by:

Cr. Cash book (bank a/c) to remove the false cash receipt.

Jan 4: received a cheque of Ksh 20,000 from Muema.

Jan 20: Cheque received on 4th Jan, was dishonoured. The bank charged him Ksh. 2,500.

DATE DETAILS F CASH BANK DATE DETAILS F CASH BANK

4/1/…. Muema 20,000 20/1/… Dishonoured 20,000
cheque /
Muema
Bank charges 2,500

In the ledger:

Dr. Debtor’s a/c

Cr. Bank a/c to remove the false cash receipts.

11. Drawings
Withdrew Ksh 8,900 from the bank for personal use.

Interpretation: this is recorded as drawings on the credit side of the cash book…personal use refers
to Drawings.

DATE DETAILS F DISC. CASH BANK DATE DETAILS F DISC. CASH BANK
ALL. RCVD
Drawings 8,900

12. CONTRA-ENTRY (C)

This refers to transaction affecting both sides of a 2 or 3 column cash book simultaneously. Mainly
involve cash and bank accounts. It’s indicated by letter ‘c’ in the folio column.

a. Withdrew From bank for office use

Withdrew Kshs. 15,000 from the bank for business use.

Interpretation: money was taken from business bank account to the cash till. The amount in bank
reduced while amount in cash increased by the same amount. So it’s a contra-entry.

DATE DETAILS F DISC. CASH BANK DATE DETAILS F DISC. CASH BANK
ALL. RCVD
Bank 15,000 Cash 15,000

PREPARED BY: TOBIAS YOGO

GENDIA HIGH SCHOOL
 b. Deposited all the cash / banked all the cash.
Steps.

1. Add all the cash on the Dr. side, say 70,000

2. Add all the cash on the Cr. Side, say 50,000
3. Get the difference 70,000 – 50,000 = 20,000
4. Credit the difference, 20,000 in the cash. Write Bank on the details column and post the
amount on cash column. Cr. side
5. Debit the difference, 20,000 in the bank. Write Cash on the details and post the amount on
bank column. Dr side
6. Write letter ‘C’ on folio columns for both transactions.

DATE DETAILS F DISC. CASH BANK DATE DETAILS F DISC. CASH BANK
ALL. RCVD
Cash 20,000 Bank 20,000

c. Deposited all the cash except. / banked all cash except.

1. Add all the cash on the Dr. Side, say 70,000

2. Add all the cash on the Cr. Side, say 50,000
3. Get the difference 70,000 – 50,000 = 20,000
4. Get the difference with cash at hand and the ‘except’ amount, say the except was 1,300, it
will be 20,000 – 1,300 =18,700
5. Credit the difference, 18,700 in the cash. Write Bank on the details column and post the
amount on cash column. Cr. side
6. Debit the difference, 18,700 in the bank. Write Cash on the details and post the amount on
bank column. Dr Side
7. Write letter ‘C’ on folio columns for both transactions.
8. Post the ‘except’ amount, 1,300 on the credit side of the cash book on the cash column,
writing ‘balance c/d’ on the details.

Deposited all the cash into bank except Ksh 13,700

DATE DETAILS F DISC. CASH BANK DATE DETAILS F DISC. CASH BANK
ALL. RCVD
Cash 18,700 Bank 18,700
Bal c/d 1,300
70,000 70,000

POINTS TO NOTE

WORD ON THE TRANSACTION WORD TO POST ON DETAILS

Sold ……. Sales (Dr.)
Bought….. Purchases (Cr)
Withdrew….. for personal use Drawings (Cr)

PREPARED BY: TOBIAS YOGO

GENDIA HIGH SCHOOL
 1. The format must be correct. No interchange of columns.
2. Details / particulars must be correct.
3. Dates must be written.
4. Totals on discount columns must be shown.
5. No interchange of discount columns.
6. Balance must be specified whether b/d or c/d.

Reasons for maintaining a cash book.

a) To reduce the number of entries made to the general ledger.
b) To easily avail cash balances / show cash balances at a glance
c) Enhance specialization in book – keeping by allocating different ledgers to
different workers.
d) To easily monitor the cash inflows (receipt)
e) To easily monitor the cash outflows (payments)
f) To show discount allowed to debtors
g) To show discount received from creditors.
Why a three column cash book is used both as a journal and a ledger.
Cash and bank column in the cash book acts as a ledger and total balances are used to prepare
trial balance like other ledger accounts.
Both discount allowed and discount received columns acts as journal and their totals are
transferred to the ledger.
Cash transactions are entered in a three column cash book directly as they occur. It is a
journal because cash transactions are recorded as they occur.

PREPARED BY: TOBIAS YOGO

GENDIA HIGH SCHOOL