CASH BOOKS

 A cash book is a book in which all cash receipts and

payments are recorded.
Types of cash books
1. Two column cash book
2. Three column cash book
3. Petty cash book
Two column cash book
 This is a cash book with both cash and bank
columns
This cash book is divided into two sides
a) The receipts side:
Records any cash or cheques received. If received by
cash record in cash column, if by cheque in bank
column
b) The payments side:
Records any cash or cheques paid. If payment is by cash
record in cash column, if by cheque in bank column
Contra entries
 This occurs when there is movement of cash to and
from cash till to the bank.
 Example
a) Took £ 2,000 from the cash till and deposited into
the bank account
b) Withdrew £ 1,500 from bank to office use
Note:
Drawings:
This is the amount taken by the owner from the
business for personal use. This is not a contra
Two column cash book: format
RECEIPTS(DEBIT-DR) PAYMENTS (CREDIT-CR)
DATE NARRATION CASH BANK DATE NARRATION CASH BANK
£ £ £ £
Balancing A cash book
The balance is the amount of money remaining in the
cash till or in the bank account at the end of a period.
Balance = Total Receipts – Total Payments
Types of balances
a) Opening balance
This is the balance at the start of a period. This is called
balance Brought forward (bal. b/f) or Balance brought down
(bal. b/d)
b) Closing balance
This is the balance at the end of the period. This is called
balance carried forward(bal. c/f) or balance carried down (bal.
c/d). This is what is brought forward as the opening balance.
 Example
2018 Write a two column cash book from the following
May 1 started business with capital cash £ 1000
May 2 paid rent cash £ 100
May 3 F Flake lent us £ 5000 by cheque
May 4 We paid Mackenzie £ 650 by cheque
May 5 Cash sales £ 980
May 7 N Miller paid us by cheque £ 620
May 9 We paid B. Burton in cash £ 220
May 11 Cash sales paid direct into the bank £530
May 15 G. More paid us in cash £ 650
May 16 We took £ 500 out of cash till and paid into the bank
May 19 Paid F Flake £ 1000 by cheque
May 22 Cash sales paid into the bank £ 660
May 26 Paid motor expenses by cheque £ 120
May 30 Withdrew £ 1000 cash from the bank for business use
May 31 Paid wages £ 970 in cash
Exercise 1
2018
May 1 Balances brought forward from April: Cash £540, Bank £1,400
May 4 Paid advertising costs by cheque, £320
May 6 Cash purchases £250
May 11 Received cheque from M Swann, £900
May 14 Took £450 cash out of bank account for office use
May 17 Paid sundry expenses £340 cash
May 20 Paid cheque to M Lyne £720
May 22 Cash sales £950
May 24 Paid £550 from cash till into bank
May 28 Borrowed £2,050 from N Jackson – received money by cheque
May 30 Took all the cash from the cash till and banked it except £100
Exercise 2
2018
May 1 Balances brought forward from April: Cash £54, Bank £140
May 4 Paid advertising costs by cheque, £32
May 6 Cash purchases £25
May 11 Received cheque from M Swann, £90
May 14 Took £45 cash out of bank account for office use
May 17 Paid sundry expenses £34 cash
May 20 Paid cheque to M Lyne £72
May 22 Cash sales £95
May 24 Paid £55 cash into bank
May 28 Borrowed £205 from N Jackson – received money by cheque
Exercise 1
2018
May 1 Balances brought forward from April: Cash £10,000, Bank
overdraft of £2,000
May 4 Paid salaries by cheque, £3,000
May 6 Cash sales £25,000
May 11 Received cheque from Zahra , £5,000
May 14 Banked £4,500 from cash till
May 17 Cash purchases £3,500
May 20 Paid rent £2,500 by cheque
May 22 Cash sales £10,500
May 24 Pad stationery 1,000 cash
May 28 Banked all the cash except £1000
 THREE COLUMN CASH BOOK
This is a cash book that has three columns for Cash, Bank
and Discounts.
Types of discounts
a) Discount allowed
This is the allowance given to our credit customers when they pay
on time. It is a loss to the business.
b) Discount received
This is the allowance given to us by our credit suppliers when we
pay on time. It is a gain to the business.
Format: 3 Column Cash book
Receipts Payments
2018 Cash Bank Disc 2018 Cash Bank Disc
£ £ Allowed £ £ received
£ £
EXAMPLE 1
September 1 Balances at bank £25 500; cash in hand £10 200

5 Bought goods £ 8 000 cash less a discount of £ 500

,, 7 Cash sales £ 2000
,, 8 Bought office equipment £ 6600 by cheque less 10% cash discounts
,, 10 purchased goods 2400 cash less 5% cash discounts
,, 12 Mark lent us £ 10 000 cash
,, 15 paid water 500 by cheque
,, 16 Received a cheque £14 000 from our customer Daniel less 2.5%
discounts
,, 18 Took £ 7 200 from bank for office use
,, 19 paid wages £ 8500 cash
,, 25 paid electricity £ 2 000 cash
,, 30 Sold goods worth £6000 less 3% cash discounts
 EXERCISE
2018 Prepare a three column cash book for from the following
July 1 Balance b/f; cash £ 2,500; Bank £ 7,400
July 2 Bought goods by cheque £ 2,000
July 3 Cash sales £ 1,800
July 5 Banked cash £ 2,000
July 6 Paid the following suppliers by cheque in each case receiving a cash
discount of 3%.
Abdi £ 1,500, Graham £ 3,000 and Jackson £ 1,400

July 7 Received cheque from the following customers in each case allowing a
cash discount of 5%.
L. Shaw £ 4,000, Bill Gates £3,000 and Ahmed £ 3,200.

July 10 Bought office furniture by cheque £ 3,000

July 15 Cash drawings £ 500
July 20 Paid cheque to Adhman £ 800 less £ 24 discount.
July 22 Received cash £ 1,500 from Smith less £ 60 discount.
July 30 Paid wages in cash £ 1,000