Ca

h Book

Whats on the menu?

Difference between the cash and bank account Advantages of the cash book 2-column Cash Book Contra Entries Posting entries in cash book to ledger accounts

Cash?? Bank??
How much ang pow money did you receive from the last Chinese New year? What did you do with the money?

How much are you left with? Now let us try to record the transactions in the cash and bank accounts on the board.

Cash?? Bank??
Cash Account
Involves money kept in the office Usually small amount of money involved

Bank Account
The rest of money NOT in cash account Kept in current account of bank (not in fixed deposit account)

Cash Account and Bank Account

How are they similar?
Both are assets
An increase Dr A decrease Cr

An inflow of cash = increase of assets debit An outflow of cash = decrease of assets credit

Ca$h Book?
What is a cash book?
The cash book consists of both the cash and bank accounts.

There is no need to maintain separate cash and bank accounts.

2 column Ca$h Book

Dr (IN)
Date Particulars

2 column Cash Book

Cash Bank Date Particulars

Cr (OUT)
Cash Bank

2 column Ca$h Book

Date Particulars Cash
Bank

Date

Particulars

Cash

Bank

Cash account
Date Particulars $ Date Particulars $

Bank account
Date Particulars $ Date Particulars $

Ca$h Book?
Cash book as a book of original entry?
Information from source documents are recorded directly into the ca$h book

What are the source documents?

Receipts Cash till slips Payment vouchers Counterfoils of cheques

Source Documents
Taken from page 114 115 of TB

Receipt

Counterfoil Cash till slip

Cheque

Source Documents
Taken from page 114 115 of TB

Paying-in slip

Source Documents
Taken from page 114 115 of TB

Payment voucher

Advantages of a Ca$h Book

Reduces the number of entries in the ledger
All ca$h entries are recorded in ca$h book. So ledger does NOT include any ca$h entries at all The number of accounts in the ledger is reduced

Higher efficiency
One person can take charge of the ca$h book

Easier reference to the Cash and Bank account

Both accounts are found in the Ca$h book All money received and paid on a particular date are recorded on the same page instead of on different pages in the ledger.

2 column Ca$h Book

Therefore, the cash book is like a journal and ledger. Why? Journal - information from the source document is recorded directly into it Ledger the cash and bank accounts are not found in the ledger books at all

Exercise 1
Now, lets try to record some entries into OUR ca$h book On April 2, you received
A birthday gift $500 in the form of cheque from Mum and Dad A birthday gift $100 cash from Aunty Mary A birthday gift $40 cash from Cousin Lily

Exercise 1
On April 2, you paid
$200 in cheque for expenses incurred for holding birthday party at Hard Rock Caf Cash $10 for food bought for grandma who was unable to attend your party Donate a $40 cheque to National Kidney Foundation (NKF) as a good deed.

Dr (IN)
Date 2002 Apr 2 Birthday Gift Parents Birthday Gift Aunty Mary Birthday Gift Cousin Lily Particulars

Two-column Cash Book

Cash Bank Date $ $ 500 100 40 Grandmas food NKF 2002 Apr 2 Party Particulars

Cr (OUT)
Cash $ Bank $ 200

10 40

Contra Entry
What is a contra entry?
To record the following transactions
When money from the bank is taken out for office use When money from the office is put into the bank

2002 May May

2 25

$100 is withdrawn from the bank for office use $250 from the office is paid into the bank

Dr (IN)
Date 2002 May 2 Bank 25 Cash Particulars

Two- column Cash Book

Cash $ 100 250 Bank $ Date 2002 Particulars

Cr (OUT)
Cash $ Bank $

May 2 Cash
25 Bank 250

100

Now, lets try a question

Pair with the partner next to you Post the entries on worksheet 1

Posting to ledgers
Dr (IN)
Date Particulars 2002 Jan 1 Balance b/d

2 column Cash Book

Cash $ 100 Bank $ 850 Date Particulars 2002 Jan 7 Purchases

Cr (OUT)
Cash $ 50 Bank $

5 Ken 18 Sales 120

150

20

Stationery

35

Posting to ledgers
Ken
Date Particulars $ Date 2002 Jan 5 Particulars $

Bank

150

Purchases
Date Particulars $ 50

Date

Particulars

2002 Jan 7 Cash

Posting to ledgers
Sales
Date Particulars $ Date 2002 Jan 18 Particulars $

Cash

120

Stationery
Date Particulars $ 35

Date

Particulars

2002 Jan 20 Cash

Posting to ledgers
Based on the cash book prepared for worksheet 1, do the posting to the appropriate ledgers.

So, what have I learnt?

Difference between the cash and bank account Advantages of the cash book 2-column Cash Book Contra Entries Posting to ledgers