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Basics Of Accounting

Published in: Accountancy
  • Soumendra R

    • Delhi
    • Fresher
    • Qualification: ICWA
    • Teaches: Statistics, Costing, Business Mathematics, Account...
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Basics, Journal, Ledger

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    CASH BOOK CASH BOOK The Cash Book is a sub-division of the book of original entry recording transactions involving receipts or payments of cash. All cash transactions are first entered in the Cash Book and then posted from Cash Book into the ledger. FEATURES 1. 2. 3. 4. 5. 6. Only Cash transactions are recorded in the Cash Book. It performs the functions of both journal and the ledger at the same time. All cash receipts are recorded in the debit side and all cash payments are recorded in the credit side. It records only one aspect of a transaction, i.e. Cash. All cash transactions are recorded chronologically in the Cash Book. The Cash Book, recording only cash transactions, can never show a credit balance. KINDS OF CASH BOOK ii iii Single Column Cash Book Cash Book with Cash and Bank columns Cash Book with cash, Bank and Discount Columns PETTY CASH BOOK Almost all businesses are to spend small sums of money for variety of small regular expenses, e.g., purchasing newspaper, pins, etc. For this, a Petty Cash Fund is established by transferring a small amount of cash from Head cashier to a person who is designated to be responsible for it — the Petty Cashier. The petty cashier will record all the transactions in a separate book called Petty Cash Book. SYSTEMS OF PETTY CASH 1. 2. ORDINARY SYSTEM OF PETTY CASH: Under this system, the petty cashier is given a lump sum amount of cash. After spending the whole amount, he submits the account to the head cashier. IMPREST SYSTEM OF PETTY CASH: Under this system, a fixed sum or float is allocated as sufficient to meet petty cash expenditure for an agreed period of time. At the end of the agreed period, the petty cashier submits the account of the amount spent by him. The sum expended by the petty cashier is reimbursed, thus making up the balance to the original sums.
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    ANALYTICAL PETTY CASH BOOK The most advantageous method of recording petty cash payment is to enter them in the Analytical Petty cash book. In the Analytical Petty Cash Book a separate column is used for each commonly occurring item expenditure such as postage, stationery, travelling, wages, etc. When a petty expense is recorded in the right-hand total payment column, immediately the same amount is recorded in the appropriate analysis column. At the end of a particular period, all the analysis columns are added and posted to the debit side of the respective accounts. The following points are worth noting: a. b. c. d. The pages are not divided down the center, major space is provided for credit side and the debit side contains only two columns — money column and cash book folio column. The chief item of receipt is the original imprest. Other items include the money collected from private telephone calls, sale of old newspapers, etc. Money disbursed are recorded in the credit side and then analysed out into number of analysis columns which serve as collection columns for a large number of small items. Thus all the stationery is collected in the 'Stationery' column. Certain payments cannot be added together in the above way, for example, small payment to creditors. A special column is provided, under the heading 'Ledger Account' to record these type of payments. These items are posted separately to their respective accounts in the ledger. BALANCING OFF THE PETTY CASH BOOK At the time of balancing off the Petty Cash Book, a line is drawn right across the figures on the credit side and all the columns are added up. Then the analysis columns only are closed with a double line, the total column being left open. The balance of petty cash in hand is find out after deducting the total of the payment column in the credit side from the received column in the debit side. This is inserted in the credit column, the book is balanced and the balance is brought down. EXERCISES 1. Record the following transactions in a suitable cash book of Mr. P. Basu and show the closing balances of cash and bank. 2008 Jan 1 He had cash in hand 2 Opened a Bank Account 50,000 30,000
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    2 Received from Mr. T. Bose 3 Paid to Mr. N. Gopal in cheque 3 Purchase made in cash 3 Paid rent 3 Withdrawn from Bank 4 Cash Sales 4 Received a cheque from Sunil Ranjan 4 Paid wages 4 Purchased furniture in cash and paid by cheque 4 Cash purchases 5 Deposited the cheque received from Mr. Sunil Ranjan 5 Withdrawn from Bank for personal use 5 Paid Electricity Bill 5 Paid Rates and taxes 5 Purchases made in cash 5 Cash Sales 5 Sold to Sree Nagarjun 5 Purchased from Mr. Nemai Bose 7 Received a cheque from Sree Nagarjun and sent to Bank 4,000 500 1 ,ooo 250 3,000 5,000 10,ooo 200 4,000 3,000 3,000 52 100 7,000 12,000 5,000 2,000 3,000 250 25 300 2. 7 Paid railway freight 7 Purchased stamps and stationery 7 Deposited in Bank Account Prepare a triple Column Cash Book from the down the balance for the start of next month: 2008 Nov 1 Cash in hand 1 Cash at Bank 2 Paid into bank 5 Bought furniture and issued cheque 8 Purchased goods for cash 12 Received cash from Mahindar Discount allowed to him 14 Cash Sales 16 Paid to Amarnath by cheque Discount received 19 Paid into Bank following 23 Withdrawn from Bank for Private Expenses 24 Received cheque from Patel Allowed him discount transactions and bring 2,500 10,000 1 ,ooo 2,000 500 980 20 4,000 I , 450 50 400 600 1 ,430 20
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    3. 26 Deposited Patel's cheque into Bank 28 Withdrew cash from Bank for Office use 2,000 30 Paid rent by cheque 800 Shri P. Sharma, maintains a columnar Petty Cash Book on the imprest system. The imprest amount is Rs 400. From the following information write up the Petty Cash Book for the 1st week of January, 2008. 2008 Jan 1 Bought stamps 50 1 Paid bus fares 4 2 Paid postages 10 2 Bought envelopes 30 2 Paid for refreshment 3 Paid V. Srivastava, a creditor 62 3 Collection from private telephone call 10 4 Paid for postage 20 5 Paid R. Smith, a creditor 105 6 Paid train fares 45 7 Restored imprest


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