cash book, petty cash book, cash book journal, what is petty cash book, contra entry, what is contra entry, Cash Book And Petty Cash Book
The following points should be noted while preparing three Column Cash Book.
1. The opening balance of cash in hand and cash at bank is written on the debit side as "To Balance b\d". The amount of cash in hand is written in cash column and of cash at bank in bank column. In case of bank overdraft it is written on the crdit side as "By Balance b\d".
2. All receipts will be written on the debit side. Cash receipts will be entered in cash column and cheques in bank column. If a cheque is received and deposited in the bank on the same day then it should be entered in the bank column on the debit side. A cheque received but not deposited in bank on the same day must be first debited in cash column and when it is deposited in bank on some other day, it should be treated as deposit of cash in the bank. However, in the absence of any information cheque received may be entered in the bank column on the assumption that it is deposited in bank for collection on the same day. If any discount is allowed while receiving cash or cheque then it should be entered in discount column on the debit side.
3. All payments are entered on the credit side, cash payment in cash column and payments through cheque in bank column. If any discount is received while making cash or bank payment then it should be entered in discount column on the credit side.
4. Contra Entries: If cash is deposited in the bank, it should be entered in the bank column on the debit side as 'To Cash' and again on the credit side in cash column as 'By Bank'. If cash is withdrawn from bank for office use, it should be entered in cash column on the debit side as 'To bank' and again on the credit side in bank column as 'By Cash'. These transactions are not posted in the ledger as both the accounts are in cash book itself. For such entries letter "c" is written in L.F. column on each side to indicate that contra effect of this transaction is recorded on the opposite side. such entries are called 'contra entries'.
5. If cheque is drawn for personal use, it was to be entered in the bank column on the credit side as 'By Drawings Account', in such a case no contra entry is involved.
6. If there are bank charges debited by the bank to the business concern then it has to be entered in the bank column of the cash book on the credit side as "By Bank Charges".
7. If interest or dividend on securities is collected by the bank as per standing instructions, then it has to be entered in the bank column on the debit side as "To Interest/Dividend on Shares".
8. If a cheque received from a customer and deposited in the bank is dishonoured, then the entry passed for receipt of cheque has to be cancelled by reversing it should be enterd on the credit side of cash book in bank column as by concerned party account. similarly if a cheque issued to creditor is dishonoured then the entry passed for the issue of cheque has to be cancelled by reversing it should be written on the debit side in bank column as "To concerned party account".
9. Balancing: The discount columns are totaled but not balanced. The cash columns are balanced exactly in the same manner as in case of simple cash book. The process is similar for balancing the bank column also. It is possible that the bank may allow the firm to withdraw more than the amount deposited to have an overdraft. In such a case the total of the bank column on the credit side will be bigger than the on the debit side. The difference is written on the debit side as "To Balance". Then the total are written. For the next period the balance is entered on the credit side as "By Balance b\d".
Petty Cash Book:
In a business where there are large number of small payments the entries are not made in Cash Book, but in Petty Cash Book. The petty cashier is given a certain sum of money and all small payments below a certain limit are made by him. The petty cash book is maintained just like cash book. Generally petty cash book is maintained on Imprest System. Under this system a rough estimate of the small payments for a period of month is made and the Head Cashier gives the Petty Cashier the estimated amount. Petty Cashier makes payments and records the transactions in the Petty Cash Book. At the end of the period the Petty Cashier balances his book. hen the Chief Cashier pays him the amount which he spent, so that original amount of Petty Cash with which he started is restored.
Imprest System is very useful specially if an Analytical petty cash book is used. Under this method a separate column is provided to record each head of petty expense along with a total column. Every payment is entered in the concerned head of petty expenses and in total column. All the payments made are analysed in the column of petty cash book itself, under the different heads of expenses. hence it is called Analytical petty cash book.
cash book, petty cash book, cash book journal, what is petty cash book, contra entry, what is contra entry, Cash Book And Petty Cash Book
The following points should be noted while preparing three Column Cash Book.
1. The opening balance of cash in hand and cash at bank is written on the debit side as "To Balance b\d". The amount of cash in hand is written in cash column and of cash at bank in bank column. In case of bank overdraft it is written on the crdit side as "By Balance b\d".
2. All receipts will be written on the debit side. Cash receipts will be entered in cash column and cheques in bank column. If a cheque is received and deposited in the bank on the same day then it should be entered in the bank column on the debit side. A cheque received but not deposited in bank on the same day must be first debited in cash column and when it is deposited in bank on some other day, it should be treated as deposit of cash in the bank. However, in the absence of any information cheque received may be entered in the bank column on the assumption that it is deposited in bank for collection on the same day. If any discount is allowed while receiving cash or cheque then it should be entered in discount column on the debit side.
3. All payments are entered on the credit side, cash payment in cash column and payments through cheque in bank column. If any discount is received while making cash or bank payment then it should be entered in discount column on the credit side.
4. Contra Entries: If cash is deposited in the bank, it should be entered in the bank column on the debit side as 'To Cash' and again on the credit side in cash column as 'By Bank'. If cash is withdrawn from bank for office use, it should be entered in cash column on the debit side as 'To bank' and again on the credit side in bank column as 'By Cash'. These transactions are not posted in the ledger as both the accounts are in cash book itself. For such entries letter "c" is written in L.F. column on each side to indicate that contra effect of this transaction is recorded on the opposite side. such entries are called 'contra entries'.
5. If cheque is drawn for personal use, it was to be entered in the bank column on the credit side as 'By Drawings Account', in such a case no contra entry is involved.
6. If there are bank charges debited by the bank to the business concern then it has to be entered in the bank column of the cash book on the credit side as "By Bank Charges".
7. If interest or dividend on securities is collected by the bank as per standing instructions, then it has to be entered in the bank column on the debit side as "To Interest/Dividend on Shares".
8. If a cheque received from a customer and deposited in the bank is dishonoured, then the entry passed for receipt of cheque has to be cancelled by reversing it should be enterd on the credit side of cash book in bank column as by concerned party account. similarly if a cheque issued to creditor is dishonoured then the entry passed for the issue of cheque has to be cancelled by reversing it should be written on the debit side in bank column as "To concerned party account".
9. Balancing: The discount columns are totaled but not balanced. The cash columns are balanced exactly in the same manner as in case of simple cash book. The process is similar for balancing the bank column also. It is possible that the bank may allow the firm to withdraw more than the amount deposited to have an overdraft. In such a case the total of the bank column on the credit side will be bigger than the on the debit side. The difference is written on the debit side as "To Balance". Then the total are written. For the next period the balance is entered on the credit side as "By Balance b\d".
Petty Cash Book:
In a business where there are large number of small payments the entries are not made in Cash Book, but in Petty Cash Book. The petty cashier is given a certain sum of money and all small payments below a certain limit are made by him. The petty cash book is maintained just like cash book. Generally petty cash book is maintained on Imprest System. Under this system a rough estimate of the small payments for a period of month is made and the Head Cashier gives the Petty Cashier the estimated amount. Petty Cashier makes payments and records the transactions in the Petty Cash Book. At the end of the period the Petty Cashier balances his book. hen the Chief Cashier pays him the amount which he spent, so that original amount of Petty Cash with which he started is restored.
Imprest System is very useful specially if an Analytical petty cash book is used. Under this method a separate column is provided to record each head of petty expense along with a total column. Every payment is entered in the concerned head of petty expenses and in total column. All the payments made are analysed in the column of petty cash book itself, under the different heads of expenses. hence it is called Analytical petty cash book.
cash book, petty cash book, cash book journal, what is petty cash book, contra entry, what is contra entry, Cash Book And Petty Cash Book
