Subsidiary Books - Cash Transaction. Samir K Mahajan

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1 Subsidiary Books - Cash Transaction

2 CASH BOOK A cash book is a special journal which is used to record all cash receipts and cash payments. The cash book is a book of original entry or prime entry since transactions are recorded for the first time from the source documents. The cash book is a ledger in the sense that it is designed in the form of a cash account and records cash receipts on the debit side and cash payments on the credit side. Thus, the cash book is both a journal and a ledger. Cash Book will always show DEBIT BALANCE as cash payments can never exceed cash available.

3 KINDS OF CASH BOOK Subsidiary Books - Cash Transaction Single Column Cash Book Double Column Cash Book o Cash book with discount and cash columns o Cash book with cash and bank columns o Cash book with discount and bank columns Triple Column Cash Book with cash, bank and discount columns Petty cash Book

4 SINGLE COLUMN CASH BOOK Single column cash book (simple cash book) has one amount column in each side. All cash receipts are recorded on the debit side and all cash payments on the credit side. In fact, this book is nothing but a Cash Account. Hence, there is no need to open cash account in the ledger. Debit Side Single Column Cash Book of... Credit side Date Particular R.N. L.F. Amount Date Particular V.N. L.F. Amount

5 vi. Amount :This column appears in both sides of the cash book. The actual amount of cash receipt is recorded on the debit side. The actual payments are entered on the credit side. SINGLE COLUMN CASH BOOK contd. i. Date :This column appears in both the debit and credit side. It records the date of receiving cash at debit side and paying cash at credit side. ii. Particulars :This column is used at both debit and credit side. It records the names of parties (personal account), heads (nominal account) and items (real account) from whom payment has been received and to whom payment has been made. iii. Receipt Number (R.N):This refers to the serial numberof the cash receipt. iv. Voucher Number (V.N) :This refers to the serial number of the voucher for which payment is made. v. Ledger Folio (L.F):This column is used in both the debit and credit side of cash book. The ledger page (folio) of every account in the cash book is recorded against it.

6 SINGLE COLUMN CASH BOOK contd. Balancing : The cash book is balanced like any other account. The total of the receipt (debit side) column will always be greater than the total of the payment column (credit side). In the beginning of the next period, to show the cash balance in hand, the balance amount is recorded in the debit side as To balance b/d or c/f. The difference will be written on the credit side as By Balance c/d or b/f.

7 SINGLE COLUMN CASH BOOK: EXAMPLE Enter the following transactions in a Single column Cash Book 1980 Jan 1 : Cash in hand Rs Jan.5 : Received from Akash ---- Rs 300 Jan 7 : paid rent Rs 30 Jan 8 : sold goods Rs 300 Jan10 : Paid TanishQ Rs 700 Jan 27: Purchased furniture Rs 200 Jan 31 : paid salaries Rs 100

8 SINGLE COLUMN CASH BOOK: EXAMPLE Cash Book of Dr Receipts payments Cr Date Particular R.N. L.F. Amount 1980 Jan 1 To Balance b/d Date Particular V.N. L.F. Amount 1980 Jan. 7 By rents 30 Jan.5 To Akash 300 Jan. 10 By TanishQ 700 Jan. 8 To Sales 300 Jan. 27 By Furniture 200 Jan. 31 By Salaries 100 Jan 31 By Balance c/d Feb 1 To Balance b /d ,770

9 DOUBLE COLUMNS CASH BOOK/CASH CASH BOOK WITH DISCOUNT AND CASH COLUMNS On either side of the single column cash book, another column is added to record discount allowed and discount received. Debit Side Date Particular R.N. L.F. Discount Allowed Cash Book of (Cash book with Discount and Cash Column ) Amount Date Particular V.N. L.F. Discount Received Credit side Amount

10 DOUBLE COLUMNS CASH BOOK/CASH CASH BOOK WITH DISCOUNT AND CASH COLUMNS contd. Balancing: It should be noted that in the double column cash book, cash column is balanced like any other ledger account. But the discount column on each side is merely totalled. The total of the discount column on the debit side shows the total discount allowed to customers and is debited to Discount Allowed Account. The total of the discount column on the credit side shows total discount received and is credited to Discount Received Account.

11 DOUBLE COLUMNS CASH BOOK/CASH BOOK WITH DISCOUNT AND CASH COLUMNS : Example Enter the following transactions in a Double column Cash Book 1980 Jan 1 : Cash in hand Rs Jan.5 : Received from Akash ---- Rs. 290 Discount Allowed Rs. 10 Jan 7 : paid rent Rs. 30 Jan 8 : sold goods Rs. 300 Jan10 : Paid Laxmi Rs.695 Discount Received Rs. 5 Jan 27: Purchased furniture Rs 200 Jan 31 : paid salaries Rs 100

12 Cash Book of Dr Receipts Payments Cr Date Particular R. N Jan 1 To Balance b/d L. F. Amount Date Particular V. Discount Cash N allowed Jan. 7 By rents L. F. Amount Discount Received Cash 30 Jan.5 To Akash Jan. 10 By Laxmi Jan. 8 To Sales 300 Jan. 27 Furniture 200 Jan. 31 By Salaries 100 Jan 31 By Balance c/d Feb 1 To Balance b/d 10765

13 TRIPLE COLUMN CASH BOOK Large business concerns receive and make payments in cash and by cheques. Where cash discount is a regular feature, a Triple Column Cash Book is more advantageous. This cash book has three amount columns (cash, bank and discount) on each side. All cash receipts, deposits into bank and discount allowed are recorded on debit side All cash payments, withdrawals from bank and discount received are recorded on credit side. Cash and bank columns are balanced Discount columns are merely totalled

14 TRIPLE COLUMN CASH BOOK contd. Dr Receipts Triple Column Cash Book Payments Cr Date Particular R.N. L.F. Dis co un t All ow ed Cash (Rs.) Bank Date Particula r V.N. L.F. Dis co un t Re cie ve d Cash (Rs.) Bank

15 Contra Transactions Contra transactions: Transactions which affect bank (bank balance) simultaneously cash in hand (cash balance) and cash at When cash is deposited in bank, it will decrease cash in hand and increase in cash at bank. Decrease in cash in hand will be shown by by bank A/C in credit side and the amount will be shown in cash column of credit side increase in cash at bank will be shown by to cash A/C or office A/C in debit side and the amount will be shown in bank column of debit side

16 Contra Transactions contd. When cash is deposited in bank Debit Side Double Column Cash Book Credit side Date Particular Cash (Rs.) Bank Date Particular Cash (Rs.) Bank 2014 Jan 31 To Cash A/C XXXX 2014 Jan 31 By Bank A/C XXXX

17 Contra Transactions contd. When cash is withdrawn from bank for business, it will decrease cash in bank and increase in cash at hand. Decrease in cash at bank will be shown by to Bank A/C in debit side and the amount will be shown in cash column of debit side increase in cash at hand will be shown by by cash A/C or office A/C in credit side and the amount will be shown in bank column of credit side

18 Contra Transactions contd. When cash is withdrawn from bank for business Debit Side Double Column Cash Book Credit side Date Particular Cash (Rs.) Bank Date Particular Cash (Rs.) Bank 2014 Jan 31 To Bank A/C XXXX 2014 Jan 31 By Cash A/C XXXX

19 TRIPLE COLUMN CASH BOOK: Example Enter the following transactions in a triple column Cash Book 1980 Jan 1 : Commences business with cash Rs Jan 3 : pays Rs in to bank current account Jan.4 : received cheque Rs 600 from Toshi Jan 7 : pays into bank Toshi s cheque Rs 600 Jan 10 : pays Patel by cheque Rs.330 and allowed discount of Rs 20 Jan10 : Sima pays into his bank account Rs 475 Jan 12: receives cheque for Rs. 450 from Vora and allowed him discount Rs 10 Jan 14: receives cash for Rs 75 and cheque for Rs 100 for cash sales Jan 20 pays into bank Rs Jan 23 : pays by cheque Rs 280 for cash purchases Jan30 : pays sundry expenses in cash for Rs 50 Jan 31 : draws a cheque Rs. 400 for office use Jan 31 : draws a cheque Rs. 275 for private use use Jan 31 : pays Anita Rs 375 in cash and is allowed discount Rs 25 Jan 31 : Pays rent Rs 200 and by cheque Jan 31 : purchases goods Rs 300 for cash Jan 31 : receives cheque for commission for Rs 500 from Manohar and pays the same into bank

20 Cash Book Dr Receipts Payments Cr Date Particular L.F. Amount 1980 Jan 1 Jan 3 Jan 4 Jan 7 Jan 10 Jan 12 Jan 14 Jan 20 Jan 31 Jan 31 To capital A/C To Cash A/C To Toshi A/C To Cash A/C To Sima A/C To Vora A/C To Sales A/C To Cash A/C To Bank A/C To Commission A/C (C) (C ) (C ) ( C ) Discou nt Alowe d 10 Cash Bank Date Particular L.F Jan 3 Jan 7 Jan 10 Jan 20 Jan 23 Jan 30 Jan 31 Jan 31 Jan 31 Jan 31 Jan 31 Jan 31 By Bank A/C By Bank A/C By Patel A/C By Bank A/C By Purchase A/C Sundry Expense A/C By Cash A/C By Drawing A/C By Anita A/C By Rent A/C By Purchase A/C By Balance c/d (C) (C ) (C) (C) Discount Recieved Amount Cash Bank To Balance b/d

21 Cash Book contd. Example: prepare a cash book from the followings: 1980 Jan 1 : Cash balance Rs and bank balance Jan.4 : Received cheque Rs 500 from Rakhi Jan 7 : Deposit Rakhi s cheque Rs 500 in bank Jan10 : Keya pays into business bank account Rs 475 Jan 23 : Rakhi s cheque is dishonoured Jan 24: Recieves Rs 750 from Sunaina Jan 29 : Draws a cheque Rs. 800 for office use Jan 30 : Draws a cheque Rs. 700 for private use Jan 30: Took cash Rs. 600 per personal use Jan 31 : Receives cheque for Rs 500 from Manihara and pays the same into bank

22 Cash Book Dr Receipts Payments Cr Date Particular L.F. Amount Date Particular L.F. Amount Cash Bank Cash Bank 1980 Jan 1 Jan 4 Jan 7 Jan 10 Jan 12 Jan 29 Jan 31 To balance b/d To Rakhi To Cash A/C To Keya To Sunaina Bank A/C Manihara (C ) (C ) Jan 7 Jan 23 Jan 29 Jan 30 Jan 30 Jan 31 By Bank A/C By Rakhi Cash A/C Drawing A/C Drawing A/C By Balance c/d (C) (C ) Feb 1 To Balance b/d

23 PETTY CASH BOOK Petty means small. In every organisation, a large number of small payments such as conveyance, carriage, cartage, postage, telegrams and other expenses (collectively recorded under miscellaneous expenses) are made. These are generally repetitive in nature. If all these payments are handled by the cashier and are recorded in the main cash book, the procedure is found to be very cumbersome. The cashier may be overburdened and the cash book may become very bulky. To avoid this, large organisations normally appoint one more cashier (petty cashier) and maintain a separate cash book to record these transactions. Such a cash book maintained by petty cashier is called petty cash book.

24 PETTY CASH BOOK cont. The petty cashier works on the Imprest system. Imprest means money advanced on loan. Under this system, a definite sum, say Rs. 2,000 is given to the petty cashier at the beginning of a certain period. This amount is called imprest amount. The petty cashier goes on making all small payments out of this imprest amount and when he has spent the substantial portion of the imprest amount say Rs.1,780, he gets reimbursement from the head cashier after submitting the petty cash book to the head cashier and satisfying the accounts with the vouchers. Thus, he again has the full imprest amount in the beginning of the next period. The reimbursement may be made on a weekly, fortnightly or monthly basis, depending on the frequency of small payments. (In certain cases, the petty cash system is operated through the main cash book itself. In such instances, the petty cash book is not maintained independently.)

25 PETTY CASH BOOK contd. Petty Cash Book contd. As in the case of any other cash book, petty cash book also has the debit side and the credit side. The debit side has very infrequent entries because cash receipt by the petty cashier is mainly from the cashier at the beginning or close of a specified period. The credit side has many columns. For each important petty expenses there is a seperate column, These analytical columns helps to know the actual amount spent on each and every type of petty expenses for the specified period.

26 PETTY CASH BOOK contd. Petty Cash Book contd. Each petty payment is first entered in the total payments column, and then recorded in the respective analytical column, so that i. the total amount spent on each expenses for a particular period can be easily ascertained by adding up the respective column. ii. only the periodical total of each column is posted to the ledger. iii. the total petty payment for any period can be easily ascertained from the total payments column. The analytical petty cash book may be designed according to the requirements of the business.

27 Petty Cash Book contd. Dr Petty Cash Book Cr Amount Received C.B.F.N Date Particula r V. N. Amount Paid Analysis of Payment Rs. Rs. Postage and Telegraph Printin g and Statio nary Carriage Office Expenses and Repairs Sundri es L.f.

28 Petty Cash Book: Contd. Explanation of columns in the analytical petty cash book 1. Receipts: This is the first column of the petty cash book. Amount received by the petty cashier for meeting petty expenses and the opening balance of petty cash will be recorded in this column. 2. C.B.F.N: This refers to Cash Book Folio Number. In this column we write the page number of the cash book where cash paid by the cashier is recorded. 3. Date: In this column, the date of receipt / payment of cash is recorded. 4. Particulars: This column records the details of the receipts / payments. Cash received in the beginning is shown as To cash and all the petty expenses are shown as By expenses (name of the expense). 5. V.N.: The serial number of the voucher (cash payment) is written in this column.

29 Petty Cash Book: Contd. 6. Total Payments: This column records the amount of every expense. At the end of the week or month expenses are totalled and afterwards balanced. The total expenses of the week or the month is compared with the total of the receipts column and the balance is obtained. 7. Postage and Telegrams: This column records postal expenses like post card, envelope, inland letter, postage stamps, registered letter, parcel, telegrams and telephone charges. 8. Printing & Stationery: It includes expenses incurred for purchasing materials such as paper, ink, pencil, eraser, carbon paper and other items of stationery. 9. Cartage / Freight / Carriage: In this column carriage inward of goods is recorded. It includes cartage paid to coolie, tempo charges etc. 10.Travelling Expenses / Conveyance: In this column fare for hiring auto rickshaw, bus, train, taxi etc., are recorded.

30 Petty Cash Book contd. 11. Office Expenses & Repairs: Minor repairing charges and petty office expenses like cleaning are included in this column. 12.Sundry Expenses / Sundries: In addition to these important expenses, there may be certain expenses, which may not have specific columns for them. Expenses like refreshment, charity, tips, amount paid to scavengers etc., are recorded in this column. 13.L.F.:This refers to the page number of the ledger where the respective account is recorded.

31 Petty Cash Book contd. Balancing Petty Cash Book At the end of the period i.e., week or month the total payments column and individual expenses columns are totalled. It should be ascertained that the total of petty expenses column must be equal to the total of payments column. The total payments column is compared with the total of receipts column and balance is obtained. The closing balances is shown as By Balance c/d. The closing balance is carried forward to the beginning of the next week or month. It is shown as To Balance b/d.

32 Petty Cash Book contd. Posting of Entries in the Petty Cash Account The petty cash book is balanced periodically. The difference between the total receipts and total payments is the balance with the petty cashier. The balance is carried to the next period and the petty cashier is paid the amount actually spent. A petty cash account is opened in the ledger. It is debited with the amount given to petty cashier. Each expense account is individually debited with the periodic total as per the respective column by writing petty cash account and the petty cash account is credited with the total expenditure incurred during the period by writing sundries as per petty cash book. The petty cash account is balanced. It reflect the actual cash with the petty cashier.

33 Petty Cash Book contd. Example: Mr Mohit, the petty cahier of M/s Samaira Traders received Rupees 2,000 on May 01, 2010 from the Head Cashier. For the month, details of petty expenses are listed here under: Date 2010 May Details Auto fare Courier services Postal stamps Erasers/Sharpeners/Pencils/Pads Speed post charges Taxi fare (Rs Rs.90) Refreshments Auto fare Registered postal charges Telegram Cartage Computer stationery Bus fare STD call charges Office sanitation including disinfectant (Rs Rs. 24) Refreshment Photo stating charges Courier services Unloading charges Bus fare Amount Rs

34 Petty Cash Book Petty Cash Book contd. Amount Received C.B. F.N Date Particular V N Amount Paid Analysis of Payment Rs May Rs. Postage Telephone and Telegram Conve yance Stationa ry Miscellan eous Cash Received Auto fare Courier services Postal stamps Erasers/Sharpeners/Pencils/Pads Speed post charges Taxi fare (Rs Rs.90) Refreshments Auto fare Registered postal charges Telegram Cartage Computer stationery Bus fare STD call charges

35 Analysis Petty Cash Book Petty Cash Book contd. Amount Received C.B. F.N Rs May Date Particular V N Office sanitation including disinfectant (Rs Rs. 24) Refreshment Photo stating charges Courier services Unloading charges Bus fare 31 Balance c/d Amou nt Paid Rs. Postage Telephone and Telegram Analysis of Payment Conve yance 15 Stationa ry Miscellan eous June Balance c/d Cash Received

In chapter 3, you learnt that all the

In chapter 3, you learnt that all the Recording of Transactions-II 4 LEARNING OBJECTIVES After studying this chapter, you will be able to : state the need for special purpose books; record the transactions in cash book and post them in the