Cash Book II
BUSINESS STUDIES FOR JSS2 THIRD TERM
SUB -THEME: BOOK-KEEPING AND BUSINESS SUCCESS
WEEK 3
Cash Book II
Performance objectives:
Students should be able to:
-
- Record cash receipts in a cash book
- Differentiate between cash book and petty cashbook
Contents:
Cash Book: To keep track of transactions, we need to continuously record entries into their respective ledger accounts. Depending on the size of the business, an organization may have millions of cash or bank entries as receiving from debtors and payment to creditors occur on a daily basis. To keep the ledger from getting too congested, a separate book dedicated to recording cash and bank entries are usually maintained. This dedicated book is known as the cash book.
A cash book is a financial journal in which cash receipts and payments including bank deposits and withdrawals are recorded first in chronological order (ie recorded according to the date of transaction). There are two types of cashbooks, and they are the 2-column cash book and the 3-column cash book. Before going into details of the types of cash book, let’s first look at a peculiar transaction that occurs in the cash book. This transaction is the contra entry transaction.
A contra entry is an entry that appears on both sides of a cash book when cash is deposited into the bank account of the cash at the hand of the company, or when cash is withdrawn from the bank account for office use.
PREPARATION OF CASH BOOK
Petty cash book is a type of cash book that is used to record minor regular expenditures such as office teas, bus fares, fuel, newspapers, cleaning, pins, and causal labour etc. These small expenditures are usually paid using coins and currency notes rather than checks. The person responsible for spending petty cash and recording it in a petty cash book is known as a petty cashier.
Dr cr
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Receipt |
Date |
Details |
VN |
Total |
Expense 1 |
Expense 2 |
Expense 3 |
Expense 4 |
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As the name implies, this type of cash book has two columns; one for recording bank and the other for recording cash transactions. The two columns on the left-hand side of the cash book are for recording cash or bank receipts under their respective headings (cash or bank), while the two columns on the right-hand side of the cash book are for recording cash payments or payments by cheque under their respective headings. To reiterate, the left-hand side of the cashbook is for recording receipts, while the right-hand side is for recording payments.
Example of a two-column cash book:
Question:
On the 1st of June 2015, Victor, a trader had $5,000 as cash in hand and a balance of $75,000 in his bank account. The following are transactions of Mr victor for the month of June 2015.
June 2nd: Received the sum of N12,000 from Morgan
June 4th: Deposited N8,000 into the bank
June 5th: Sum of N7,500 received from Dele
June 7th: Settled the account of Conte & co. N10,000 by cheque after deducting 8% discount.
June 9th: John B settled his account of N15,000 less 5% discount
June 12th: Paid wages of N9,000 by cash
June 14th: Paid BB Brothers account of N2,500 less 3% discount
June 18th: Received a cheque of N20,000 from Rabiol after allowing a discount of N1,000. The cheque was deposited into the bank immediately.
June 22nd: Ngozi’s account of N15,000 was settled by cheque after deducting 5% discount.
June 25th: Paid tax office the sum of N5,500 by cash
June 26th: Received from Taiwo Giwa the sum of N30,000 after allowing a cash discount of N1,500
June 28th: Paid wages by cheque N9,020 and withdrew N800 by cheque for private use.
You are required to prepare a 2-column cash book for victor for the month of June 2015.
Possible solution:
|
Date |
Particular |
Cash N |
Bank N |
Date |
Particular |
Cash N |
Bank N |
|
1/6/19 |
Bal b/d |
5,000 |
75,000 |
4/6/19 |
Bank |
8,000 |
|
|
2/6/19 |
Morgan |
12000 |
|
7/6/19 |
Conte & co |
|
7,200 |
|
4/6/19 |
Cash(contra) |
|
8,000 |
12/6/19 |
wages |
9,000 |
|
|
5/6/19 |
Dele |
7,500 |
|
14/6/19 |
BB brothers |
2,425 |
|
|
9/6/19 |
John |
14,250 |
|
25/6/19 |
Tax |
5,500 |
|
|
18/6/19 |
Radiol |
|
20,000 |
28/6/19 |
Wages |
|
9,020 |
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22/6/19 |
Ngozi |
|
14,250 |
28/6/19 |
drawings |
|
800 |
|
22/6/19 |
Taiwo Giwa |
30,000 |
|
30/6/19 |
Bal c/d |
43,825 |
100,230 |
|
|
|
68,750 |
117,250 |
|
|
68,750 |
117,250 |
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1/7/19 |
Bal b/d |
43,825 |
100,230 |
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