TERM: 2nd TERM
SUBJECT: BUSINESS STUDIES
CLASS: JSS 2
REFERENCE
WEEK TEN
TOPIC: CASH BOOK
CONTENT
THE MEANING OF CASH BOOK
The cashbook is a book of account which is used to record all money received and all money paid out within a period of time. Cash consists of bank notes, coins and cheque. A cash book serves a dual function of a ledger account and a book of original entry.
THE NATURE OF THE CASHBOOK
The cashbook has two sides. The left-hand side (i.e. the debit side) and the right-hand side (i.e. the credit side)
The debit side of the cash book is the receiving side while the credit side of the book is the giving side. When an organization receives money, this will be recorded on the debit side of the cash book. However, when the organization gives out money, a record of such money is made on the credit side of the cash book. Thus, satisfying the double entry principle of credit the giver and debit the receiver.
TYPES OF CASHBOOKS
There are three types of cashbooks namely (i) the simple cash Book (i.e. one Column cashbook (ii) the Two-Column cash book (i.e. Double Column Cashbook) (iii) The Three Column Cashbook.
SINGLE COLUMN CASHBOOK
This is the type of cashbook kept by some petty traders. In most cases, these traders do not keep any account with the bank. All receipts from trading are kept at home.
The simple cash book has a single column on the debit side for cash receipts and another single column on the credit side for cash payments. It is therefore called a one-column cash book. Its format is as shown below.
DR CR
Date | Particulars | Folio | Amount | Date | Particulars | Folio | Amount |
EVALUATION
READING ASSIGNMENT
Spectrum Business Studies for JS2 pg 69
Business Studies for JS2 by lawal et’al pg42-46.
Balancing Cashbook:
PREPARATION OF A SINGLE COLUMN CASH BOOK
AN ILLUSTRATION
Mr. Aluko commenced business on 1 March 2003, with a capital of N2, 000,000.00
March 2. Bought in cash some calculators for resale N500, 000.00
March 3. Paid in cash for office pins bought for resale N250, 000.00
March 4. Received from J. Rowland, a customer, cash for goods sold N300, 000.00
March 6. Received from N. Malo, another customer, cash for goods sold N200, 000.00
March 10. Paid cash for energy bill N55, 000.00
March 15. Paid cash for advertisements N75, 000.00.
Aluko’s transactions can be recorded in the two sides of the cashbook as follows:
Date | Particulars | Folio | Amount | Date | Particulars | Folio | Amount |
1/3/03 | Capital | 5 | 2,000,000.00 | 2/3/03 | Purchases | 19 | 500,000.00 |
4/3/03 | J Rowland | 8 | 300,000.00 | 3/3/03 | Purchases | 38 | 250,000.00 |
6/3/03 | N. Malo | 18 | 200,000.00 | 10/3/03 | Energy bill | 70 | 55,000.00 |
15/3/03 | Advertise- ment | 92 | 75,000.00 | ||||
Bal c/d | 1,620,000.00 | ||||||
2,500,000.00 | 2,500,000.00 | ||||||
1/4/03 | Bal b/d | 1,620,000.00 |
EVALUATION QUESTIONS
PREPARATION OF DOUBLE COLUMN CASHBOOK WITH CONTRA ENTRY
This type of cashbook is maintained in businesses which operate both cash and bank transactions. It has a column each for cash and bank transactions. The two columns are located on both the debit and credit sides of the cashbook.
When money is received, either in cash or by cheque, the cash column which receives is debited and the cash column which gives is credited. This type of entry which involves the payment of cash into the bank is called a contra entry. It is usually indicated as C in the folio column. It means the transfer of an item from one side of the account to an identical side of another account.
The format of a two column cash book is shown below:
Dr. Cr.
Date | Particulars | Folio | Cash | Bank | Date | Particulars | Folio | Cash | Bank |
An Illustration:
Record the transactions of Mr. Hassan two column cash book. Balance the cashbook. Bring down balances of cash at hand and cash in bank at the end of the period.
2004
Feb. 2 Paid N3,000,000.00 into the business as capital
Feb. 4 Paid N200,000.00 of the working capital into a bank
Feb. 10 Made cash purchases of N70,000.00
Feb. 17 Made cash sales of N90,000.00
Feb. 20 Made purchases by cheque N70,000.00
Feb. 27 Made cash sales of N70,000.00
Feb. 28 Expenses for office paid in cash N90,000.00
Feb. 29 Cash paid into bank N200,000.00
Feb. 30 Salary of attendant paid by cheque N30,000.00
DR HASSAN’S TWO COLUMN CASH BOOK CR
Date | Particulars | Folio | Cash | Bank | Date | Particulars | Folio | Cash | Bank |
2/2/04 | Capital | 3,000,000 | 4/2/04 | Bank | C | 200,000 | |||
4/2/04 | Cash | 200,000 | 10/2/04 | Purchases | 70,000 | ||||
17/2/04 | Sales | 90,000 | 20/2/04 | Purchases | 70,000 | ||||
28/2/04 | Office Exp. | 90,000 | |||||||
27/2/04 | Sales | 70,000 | |||||||
29/2/04 | Cash | 200,000 | 29/2/04 | Bank | C | 200,000 | |||
30/2/04 | Salary | 30,000 | |||||||
30/2/04 | Bal. c/d | 281,000 | 30,000 |
References
Spectrum Business Studies For JSS2. Pages 71 and 7
Business Studies for JSS2 Lawal et al. Pages 4 and 47
EVALUATION
What is Contra Entry?
WEEKEND ASSIGNMENT
Record the following transactions in a two-column cash book. Balance the cashbook and bring down the balance of cash in hand and cash at bank at the end of the period. Do not prepare other ledger accounts.
July 2 introduced N5,800 cash into the business as capital
July 4 Paid N3,700 of the capital into the bank
July 10 Purchased goods worth N600
July 15 Cash sales N900
July 20 Purchased goods worth N1,400 by cheque
July 25 Cash sales totaling N1,300
July 28 Office expenses paid for in cash N60
July 29 Cash paid into bank N2,000
July 30 Wages paid by cheque N150
READING ASSIGNMENT
(1) Spectrum Business studies for JSS Book 2 Page 69
(2) Business studies for JSS 2 by Lawal et al page 42 -46.
GENERAL EVALUATION
WEEKEND ASSIGNMENT
(a) debit (b) credit (c) side (d) upward
THEORY
Record the following transactions in a two-column cash book. Balance the cashbook and bring down the balance of cash in hand and cash at bank at the end of the period. Do not prepare other ledger accounts.
July 2 introduced N5,800 cash into the business as capital
July 4 Paid N3,700 of the capital into the bank
July 10 Purchased goods worth N600
July 15 Cash sales N900
July 20 Purchased goods worth N1,400 by cheque
July 25 Cash sales totaling N1,300
July 28 Office expenses paid for in cash N60
July 29 Cash paid into bank N2,000
July 30 Wages paid by cheque N150.
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