Books of Original

Entry
PART 2
Cashbook

 The cash book is a unique book of original entry. Although it is a journal, it also
acts as an account for Cash and Bank. This is the only book of original entry that
is balanced and the double entry is completed in the ledger. The cash book
records the receipts and payments of cash and bank. Discounts received and
allowed are also recorded in the cashbook for convenience. The format of the
cashbook is also unique, in that the accounts for cash and bank stand side by side
along with the discount column. All receipts are debited and payments credited.
 THE CASH BOOK

Date Details Folio Dis Cash Bank Date Details Folio Dis Rec Cash Bank
All
                   
Receipts Payments
                   
DEBIT SIDE CREDIT SIDE
                       
Recording entries in the Cash book

 When a document is received, the first analysis is to determine where it should be

recorded. Any document relating to cash or bank, such as, cheque vouchers, cash
bills and receipts are used to make records in the cash book. Again it is done in
chronological order and the name of the account in the ledger is written in the
details column. If the transaction involves the bank then the amount is written in
the bank column. If it is a cash transaction, then the amount is written in the
cash column. Any discount received or allowed is placed in the discount column.
Discounts

 Discount allowed
A reduction given to customers who pays their account within the time allowed.

 Discount received
A reduction given to us by a supplier when we pay his account within the discount
period given.
Contra Entries

 Since both cash and bank accounts are in the cash book, it is possible to complete
the double entry in the cash book if the transaction involves both accounts. When
this happens it is describes as a contra entry. These occur when cash is
deposited into the bank or cash is withdrawn from the bank for use in the office.
Balancing the cashbook

 The cash book is balanced to determine the amount of cash in hand and bank. To
balance the cash book means making both sides equal. The columns for Cash
and Bank on both sides of the cash book are totaled. The difference (balance) is
determined and added to the side with the smaller amount. The cash column will
always carry a debit balance; this manes that the debit side will always be greater
than the credit side, since it is not possible to overspend cash. A credit balance
(also called an overdraft) on the bank account signifies that the account has been
overdrawn, that is, cheques were written in excess of the amount in the bank.
Sometimes this is done with the permission of the bank. If no permission is given
then any cheques presented for payment would not be honored by the bank for
payment.
 Activity
Record the following transactions of S. Dippity, a retailer, in his three column cash book for the month of April 2020.
April 1 Cash at bank 1800
3 Cash sales 1490
8 Paid cash for cleaning 124
10 Received a cheque from B. Calm 1500
15 Purchases paid by cheque 1380
17 paid rent by cheque 750
19 received a cheque from S. Leep
to settle his accounts of $700 less 5%discount
21 Paid cash into bank 1200
24 received $900 cash from P.Paineto
settle his account of $950
26 Paid D. Serene by cheque to settle an
account of $840 less 5%discount
Balance the cash book and bring down the balance at the end of the month.