THE CASH BOOK

THE CASH BOOK

The cash book is the book for recording detailed particulars of all money received and paid. It is a subsidiary book and it is really part of the ledger. It therefore combines the function of subsidiary books and principal books.

The cash book consists of the cash account and bank account extracted from the ledger and combined in one book. There are 2 – column cashbook and 3 – column cashbook.

2 – Column Cash Book

This cashbook has two columns on both sides for cash transactions and bank transactions. These are in addition to the other regular columns of a standard ledger, that is; Date, Particulars and Folio. The folio is used to indicate the other book and page number in which the double entry for the given transaction is completed. Cash received and money deposited into the bank are debuted to the cash and bank columns respectively.

Contra Entry: Contra entry is an entry such that a given transaction is recorded on both sides of a given ledger. In the cash book contra entry is made when cash is deposited into the bank out of cash in hand or when cash is withdrawn from the bank account for office use. In such as a “C” is written in the folio column.

Overdraft: This is a situation where more money is withdrawn from a bank account than has been deposited into it. This means that the bank account would be a credit balance.

Example:

On 1^st April 2013, Nnamdi, a trader had N24,375 as cash in hand and a balance of N468,900 in his bank account. The following are his transactions for the month.

April 3        Received the sum of N79.875 from A. Bola in cash

          6,       Received the sum of N15,000 in cash from O Kunle

6        Settled the account of Ponle and Co N54,000 by cheque after deducting 5% of cash discount

7        Deposited N37,500 into the bank.

8        Paid wages of N56,200 by cash.

13      Paid BB Brothers account of N16,500 less 2½% by cash.

15      Laraba settled her account of N56,250 less 5%

April 19      Received a cheque of N64,125 from Biodu after allowing a discount of N3,375. The cheque was deposited into the ban immediately.

20              Paid tax office the sum of N5,065 by cash

21              Received cash of N49,500 less 2½% discount from Julius Chizea; paid wages of N56,250 in cash.

26      Chukwu’s account of N41,250 was settled by cheque after deducting 5% discount.

27      Received from Olu Samoda the sum of N106,875 after allowing a cash discount of N5,625.

28      Paid wages by cheque N56,250 and withdrew N3,750 by cheque for private use.

Discount Received A/C
N 30/4/13 Bal c/d 14,174	N 6/4/13 Ponle & Co      2700
	13/4/13 BB. Brothers    412
	26/4/13 Chukwu           2062
	19/4/13 Biodun            3,375
	27/4/13 O. Samanda    5,625
14,174	14,174

Date	Particulars	Folio	N Cash	N Bank	Date	Particulars	Folio	N Cash	N Bank
1/4/13	Bal b/d		24,375	468,900	3/4/13	Pole & Co			51,300
3/4/13	A. Bola		79,875	–	7/4/13	Bank	C	37,500	–
6/4/13	O. Kunle		15,000
7/4/13	Cash	C	–	37,500	8/4/13	Wages	–	56,200	–
15/4/13	Laraba		53,438	–	13/4/13	B.B Brothers		16,088	–
19/4/13	Biodun		–	64,125	20/4/13	Tax		5,065	–
21/4/13	J.Chisea		49,500	–	21/4/13	Wages		56,250
27/4/13	Olu Samanda		106,875	–	26/4/13	Chukwu		–	39,188
					28/4/13	Wages		–	56,250
					“	Drawings		–	3,750
			______	______	30/4/13	Bal c/d		157,960	420,037
			329063	570,525				329063	570,525
1/5/13	Bal b/d		157,960	420,057

You are required to prepare a 2-column cash book for Nnamdi for the month of April 2003. And show the discount received and allowed accounts.

Discount Allowed A/C
15/4/13 Laraba         2,812	30/4/13 Bal c/d
19/4/13 Biodun        3,375
21/4/13 J. Chisea      1,296
27/4/13 O. Samanda 5,625   13,108	30/4/13 Bal c/d     13,108 13,108

3 – COLUMN CASH BOOK

In addition to the columns already in the 2 – column cash book, this cash book has a third column which is used for recording discounts allowed, or received. It has to be emphasized that the discount column is a memorandum column just like sales journals, purchases journal, and journal proper. A memorandum record is one which is not a part of double entry record. The cash discounts allowed is recorded in the discounts column on the debit side while the cash discount received are recorded in the one on the credit side. At the end of the month or some other convenient interval, the totals of the discount allowed column is debited to the discount account while the total of the discount received is credited to the discount received account both in the general ledger.

A cash discount is the amount allowed off debts to encourage settlement of debts within a specific period of time.

Example: Using the information given in the immediate past example; prepare a three column cash book and show the discount received and allowed accounts.

Date	Particulars	Folio	Disc	N Cash	N Bank	Date	Particulars	Folio	Disc	N Cash	N Bank
1/4/13	Bal b/d		–	24,375	468,900	3/4/13	Pole & Co		2,700		51,300
3/4/13	A. Bola		–	79,875	–	7/4/13	Bank	C	–	37,500	–
6/4/13	O. Kunle		–	15,000
7/4/13	Cash	C	–	–	37,500	8/4/13	Wages	–	–	56,200	–
15/4/13	Laraba		2,812	53,438	–	13/4/13	B.B Brothers		412	16,088	–
19/4/13	Biodun		3,375	–	64,125	20/4/13	Tax		–	5,065	–
21/4/13	J.Chisea		1,296	49,500	–	21/4/13	Wages		–	56,250
27/4/13	Olu Samanda		5,625	106,875	–	26/4/13	Chukwu		2062	–	39,188
						28/4/13	Wages		–	–	56,250
						“	Drawings		–	–	3,750
				______	______	30/4/13	Bal c/d		–	157,960	420,037
			13,108	329063	570,525				5,174	329063	570,525
1/5/13	Bal b/d			157,960	420,057

Discount Received A/C
N	N 30/4/13 Sundries        5,174

Discount Allowed A/C
N 30/4/13 Sundries        13,108	N

It can be seen from this example that the entries in the ledger accounts of discount allowed and received have been reduced to one piece. It is important to note that the discount that reflects on the 3 – column cash book is cash discount but not trade discount of which there is no double entry required but only acknowledgement in the sales invoice or purchase invoice.