SESSION- 5&6 Day & Date: Thursday 21.10.

2010

 Meaning

of Cash Nature of Cash What is Cash book? Similarity with Journal & Ledger Kinds of Cash book Format of Cash book Balancing of Cash book Credit card Sale Problem Set

Cash is a current asset. It is of special significance for two reasons:

1. It is the most liquid asset to meet the current obligation of the business unit. 2. It is the one most universally accepted by creditors. The economic activities of a business involve regular flow of cash to or from the business. There fore, cash balance of a business unit is a very important element of its financial condition.

The cash book is a subdivision of the book of original entry, recording transactions involving receipts or payment of cash.

All cash transactions are first entered in the cash book and then posted from cash book into the Ledger. Cash Book is maintained in the form of a ledger with narration. Practically, the cash book is a substitute for the cash Account in the Ledger.

 The

Similarity of cash book with Journal

are:
1. All cash transactions are first recoded in the cash book and there after posted to various accounts in the ledger. CB acts as a Day book for cash transactions. All cash transactions are recoded in the cash book chronologically in order to record the date. Like Journal, narration is also given in the cash book.

 The

similarities of Cash book with the Ledger are;

The ruling of cash book is similar to that of the ledger Account. Like Ledger, Cash Book has two sides- Dr & Cr side. The recording of various transactions in the cash book really takes the shape of a Ledger Account. There is no need to open a separate cash or bank accounting the ledger At the time of preparing Trial balance , cash book is balanced off like a ledger account. Like Ledger To & By are used in cash book transactions. Like Ledger cash book is a book of final entry.

There are four kinds of cash book:

3. Triple Column

Single column cash book for recording cash transactions only

1.

2. Double Column cash book- Cash Book with cash and Bank column- for recording cash and bank transactions

cash book Cash book with Cash, Bank and Discount Column for recording cash and bank transactions involving loss or gain due to discount.

4. Petty Cash book for recording petty cash expenses and receipts.

 The

single column cash book makes a record with narration of only cash transactions, and it is just like any other account. In the cash book all receipts of cash are recorded on the debit side and all the cash payments on the cr. Side.

 1. Dr.
Date Particulars

Cash Book ( Single Column) Cr.

Vr. No. L.F. Amt Rs. Date Particulars Vr. No. L.F. Amt Rs.

10

 The

cash book in which cash and transactions involving receipts and payments by cheque are recorded is called double column cash book. It represents two different accounts and transactions are recorded accurately as being either cash or bank transactions. Bank Account being personal A/c, the golden rule of personal a/c should be followed for recording entries.

 2. Dr.
Date Particulars

Cash Book with Double Column Cr.

VN L.F . Amt Rs. Cash Amt Rs. Bank Date Particulars V.N. LF Amt Rs. Cash Amt Rs. Bank

10 11

12

 The

most exclusive cash book is the triple column Cash book, which has three amount columns on either side viz cash, bank and discount. The discount column is provided for recording discount. It is suited to large business houses which make and receive payments in cash and by cheques and which receive/allow cash discounts.

 (i)

When cash discount is allowed

Dr. Dr.

Cash/Bank A/c Discount Allowed A/c To Debtors A/c

(ii)

When cash discount is received

Creditors A/c Dr. To Cash/Bank A/c To Discount Received A/c

 3. Dr.
Date Particulars

Cash Book (Triple Column) Cr.

Disco unt Allow ed. Cash Bank Date Particulars Disc ount Allow ed. Cash Bank

10

Petty cash is the cash balance held in the form of coins and notes rather than bank deposits and is used for minor expenses like office tea, bus fare, newspaper, small stationary items etc. Petty cash fund is established by transferring a small amount of cash from Head cashier to the person who is designated to be responsible for it the Petty cashier. The petty cashier will record all the petty transactions in a seperate book known as petty cash book.

Systems of Petty Cash book:

1. Ordinary System of Petty Cash

2. Imprest System of Petty cash

Analytical Petty cash book: It gives detail of each petty expense separately column wise like postage & stamp, coolie & cartage, Printing & stationery, conveyance, Miscellaneous. Balancing of Petty cash book
1.
2.

3.

Add both the columns The balance of the petty cash in hand is found out after deducting the total of payments in credit side column from the received column I the debit side This is inserted in the credit column, the book is balanced off and the balance id brought down.

 4. Dr.
Cash received C.B. Folio

Petty Cash book Cr.

Date Particulars Voucher No. Total payment

Write up a traders single column cash book for the month of April 10097 from the following ( all figures in rupees):
1 Cash in hand 1,650 2. Cash sales 16,000 3. paid cheque to the creditor Rs. 3900 after deducting cash disc of Rs. 210 4.Wages paid in cash 2,250 4.Cash sales Rs. 18000 of which Rs. 15000 was banked on April 7. 9. Paid Cash to TCI Rs. 420 against their bill no. 64 11. Paid wages in cash 15. Cash sales Rs. 15,000, of which Rs. 12,000 was banked on April 17. Paid cleaner in cash 350 19 Cash sales 11,400 21. paid cash for window cleaning 180 25. Paid wages in cash Rs. 2,400, paid cash for rates 3,600 26. cash sales 19,200 29. Paid electricity bill in cash 900 30. cash collected from X ( debtor) Rs. 4,500 after allowing disc of Rs.200 Rule off and balance the cash book at April 30, 1997

1. 2. 3. 4. 5. 6. 7. 8. 9.

In order to find out cash in hand at the end of the month, the cash book is balanced like an ordinary account. The steps are as follows: Add up the Dr. side of the cash book with pencil Add up the credit side of the cash book with pencil the difference between both side is the balance Enter this balancer on the lighter side Erase the pencil total Draw a single line just below the balance amount both sides Now re-add both sides including the balance. Total of both sides should be same. Underline the total with double lines Carry down the balance to the opposite side as To baalce b/d. Now the cash book is ready for the entries in the next month.

JP is used for making the original record of those transactions, because of their importance and rareness of occurrence which do not find a place in any of the subsidiary journal books. Entries recorded in the journal proper may be classified as follows;
1. Opening entries 2. Closing Entries 3. Transfer entries 4. Rectification of Error entries 5. Adjusting entries 6. Credit Purchase of assets 7. Credit sale of assets 8. Credit purchase of stationery

From the sellers view point, a credit card sale is one equivalent to a cash sale. How ever there is cost involved, i.e the monthly commission charge by credit card companies for each of the transaction. It is extracted from the sellers bank account by direct debit The rate of commission varies between 1% to 4%. A monthly statement of account is sent by the credit card company to their card holders who may pay in full or part. Journal Entry: (1) Bank A/c Dr. ( Daily total of credit card sales) To Sales A/c (ii) Commission A/c To Bank A/c Dr. ( Commission on total monthly credit card sales)