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WEEK3: CASHBOOK
WEEK 3
TOPIC: CASHBOOK
Specific Objectives: By the end of this lesson, the students should be able to:
i. Define cashbook
ii. Differentiate between cashbook and petty cashbook
iii. Enter transactions in the one column cashbook
Meaning of Cashbook:
The cashbook is a subsidiary book used to record cash transactions. All cash transactions (receipts and payments) are first recorded in the cashbook before they are posted to ledger.
The cashbook is also a ledger because it has debit and credit sides and is balanced at the end of the month to determine the differences between cash received and cash paid.
Cash is divided into two equal sides, the left hand sides, is the debit side (Dr.) and the right hand side is the credit side (Cr.). All cash receipts are recorded on the debit side while all cash payment are recorded on the credit side.
There are three types of cash book namely:
1. Single column cashbook
2. Double or two column cashbook
3. Three column cashbook
Difference Between Petty Cashbook And Cashbook:
Petty cashbook is a book of account where minor expenses which cannot be conveniently entered into cashbook are recorded such as purchases of stamps, taxi fare, phone calls etc. But cashbook, the major cash transactions of the business are entered such as wages and salaries, cash paid and received from creditors and debtors respectively, purchases of goods etc.
The difference between cashbook and petty cashbook lies in the fact that frequently occurring transactions which are of small value are recorded in the petty cash book while the cashbook takes care of major expenses.
RULING OF CASHBOOK:
a. Single Column Cashbook
Dr. Cr.
Date |
Particulars |
L/F |
Amount |
Date |
Particulars |
L/F |
Amount |
b. Two Column Cashbook
Dr. Cr
Date |
Particulars |
L/F |
Cash |
Bank |
Date |
Particulars |
L/F |
Cash |
Bank |
c. Three Column Cashbook
Dr. Cr.
Date |
Particulars |
L/F |
Discount Allowed |
Cash
|
Bank |
Date |
Particulars |
L/F |
Discount Received |
Cash |
Bank |
ILLUSTRATION:
K.G Nigeria Enterprises started business with capital 4000 on Jan. 1990.
Jan 2 sold goods for cash 6000
Jan 3 receive from Okeke 3500
Jan 4 paid cash to Okoye 2000
Jan 15 paid Electricity Bill 150
Jan 26 Office Rent 200
For every transaction, ask yourself whether the money (cash) comes into business or goes out. If it comes in the transaction should be recorded on the debit side (left-hand), but if it goes out, it should be recorded on credit side (right hand side) e.g. The transactions paid “electricity bill” should be recorded on the credit side because money (cash) has been taken out of the business to pay electricity bill.
Let us record these transactions
KGT NIGERIA LIMITED CASHBOOK
Dr. Cr.
Date |
Particulars |
L/F |
Amount |
Date |
Particulars |
L/F |
Amount |
Jan 1 |
Capital |
|
4000 |
Jan 4 |
Okoye |
|
2000 |
Jan 2 |
Sales |
|
6000 |
Jan 15 |
Electricity |
|
150 |
Jan 3 |
Okeke |
|
3500 |
Jan 26 |
Rent |
|
200 |
|
|
|
|
|
Bal c/d |
|
11,150 |
|
|
|
13,500 |
|
|
|
13,500 |
|
Bal b/d |
|
11,150 |
|
|
|
|
In balancing the cashbook, the following steps should be taken:
1. Add figures on the debit side (in the above illustration, the total figures on the debit side is 13,500)
2. Add the amount on the credit side (the total of credit side is 2350)
3. Subtract the total of credit side from the total of debit side (the subtraction should be done on rough paper) (13,500 -2,350 = 11,150)
4. Enter the difference on the lower side. This is usually the credit side. With the cashbook the credit (payment) side is always lower than the debit (receipts) side.
Evaluation: Answer the following questions:
1. Define cashbook
2. Differentiate between cashbook and petty cashbook
3. Prepare one column cashbook
Assignment
Write short note on Contra Entry
