Lesson Notes By Weeks and Term - Junior Secondary School 2

CASH BOOK

TERM: 2nd TERM

SUBJECT: BUSINESS STUDIES                                

CLASS:  JSS 2

REFERENCE

  • WABP Junior Secondary Business Studies 2 by Egbe Ehiametalor et’al.

 

WEEK TEN

TOPIC: CASH BOOK

CONTENT

      • Meaning
      • Types of cashbook
      • Single column
      • Two column
      • Items on a cashbook
      • Cash column
      • Bank column
      • Discount column

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

  1. Why is the cashbook both a book of original entry and a ledger account?
  2. Mention the three types of cashbook we have.

 

READING ASSIGNMENT

Spectrum Business Studies for JS2 pg 69

Business Studies for JS2 by lawal et’al pg42-46.

 

Balancing Cashbook:

  1. Add up the figures on the debit  side of the cashbook
  2. Add up the figures on the credit side of the cashbook.
  3. Determine the difference between the figures obtained in (1) and (2) above
  4. On the side with the lower figure, write ‘balance c/d’ which is just the amount necessary to equalise the two totals.
  5. Bring down the ‘balance c/d’ to the next period as balance b/d
  6. Write down the total of the credit and the total of the debit on the same line.

 

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

  1. What are the steps involved in balancing a cashbook?
  2. Draw out the formats of (a) single column and (b) double column cashbooks.

 

 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.

  1.   Mr. Ahmed.

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

  1. Mention two types of office we have.
  2. What department is responsible for payment of staff salary?
  3. Explain the three types of trade.
  4. Write out the first six consonant of pitman shorthand.
  5. List seven aids to trade. 

 

WEEKEND ASSIGNMENT

  1. …… …….. is used to record all money received and paid out within a period of time  (a) minute book  (b) cash payment  (c) cash book  (d) cash received.
  2. There are …… types of cash book.   (a) 2  (b) 3   (c) 4   (d) 5.
  3. All petty traders keep their cash receipts in the bank  (a) Yes  (b) No  (c) Let me go home and ask  (d) I think so.
  4. There are ………….  Sides to a cash book (a) 2 (b) 3 (c)   4 (d) 5.
  5. All money paid out are recorded in the ………….side of the Cash book.

(a) debit    (b) credit    (c) side    (d) upward

  1. All money received are recorded on the …….side of the cash book  (a) credit   (b) debit   (c) upward   (d) downward.

 

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.

  1.   Mr. Ahmed.

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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