FINANCIAL ACC 101

                 TWO COLUMN CASHBOOK

Hey Guys, Happy Thursday. Sorry that this post is late, something came up but Praise be God that it is here now, so let's get started.

Two Column Cashbook is a combination of the Cash Account and Bank Account for the sake of convenience. There are separate columns for Date, Particulars, Folio, Cash and Bank on both the Debit and Credit sides.

Cash Column: contains cash receipts and payments.

Bank Column: contains all payments made by cheque and money received and paid into the Bank.

Contra Entries: are entries made in the cashbook when cash is deposited into the bank account out of cash in hand or when cash is withdrawn from the bank for office use.

Cash paid into the Bank: when there is surplus of cash in hand, the firm can pay it into the bank. Cash balance will decrease and Bank balance will increase.

Cash Column will be credited, Bank Column will be debited. There must be a letter “C” put in the folio column of both sides to signify that it’s a contra entry.

For Example:  Cash received of N700 was paid into the Bank.

Dr                                          Cash Book.                                          Cr

Date    Particulars  F Cash  Bank  Date  Particulars  F   Cash    Bank

Jan 1    Cash          c            700    Jan 1    Bank      c    700

Withdrawal from Bank: when there is shortage of cash in hand, money can be withdrawn from Bank. Bank balance decreases while Cash balance increases.

Bank Column will be credited while Cash Column will be debited and also a “C” will be put in the folio column to signify that it is a contra entry.

For Example: John withdrew cash of N900 from the Bank.

Dr                                       Cash Book                                        Cr

Date  Particulars  F  Cash  Bank   Date  Particulars  F  Cash  Bank

Jan 2   Bank           c   900               Jan 2   Cash     c              900

Bank Overdraft: The customer can take more than what he has in the bank, to meet urgent needs. The bank account balance will be on the credit side and it is a liability in the balance sheet.

For Example: Sharon enterprises shows N200 on the credit of his bank account as an overdraft.

Dr                                        Cash Book                                    Cr

Date Particulars  F  Cash  Bank    Date  Particulars  F  Cash  Bank

                                                           Bal b/f                        200

When the credit side is greater than the debit side in a cash book then there is an overdraft.

Dishonored Cheque: There are cheques received from customers but were rejected by the bank as a result of wrong signature, incorrect amount etc. When the cheque is received, the cash book is debited but when dishonored; the cashbook will be credited immediately.

EXAMPLE 1:

Write up a Two- column book from the following details and balance off as at the end of the month of March 2013.

Mar 1- Started business with capital in cash N3300

Mar 2- Paid rent by cash N100

Mar 3- Received loan from Pablo N550 by cheque

Mar 4- We paid Olive by cheque N170

Mar 5- We paid general expenses in cash N350

Mar 6- Withdrew N1500 from cash till and paid it into the bank account

Mar 7- Cash sales paid directly into the bank N3200

Mar 8- Banked cash N950

Mar 9- Cash purchases N560

Mar 10- Bought goods by cheque N150

Mar 11- Commission received by cheque N525

Mar 12- Bought Motor Van by cheque N160

Mar 13- Cash Drawings by the Proprietor N25

Mar 14- We paid Sarah for goods bought N400. N300 in cash; N100 by cheque.

Mar 26- Wages paid in cash N50

Mar 27- Bought stationery paying by cash N100

Mar 28- Withdrew N145 from Bank for private use.

Mar 30- Rent received by cheque N50

Mar 31- Cash Sales N1400

Dr                                                    CASH BOOK                                 Cr

Date   Particulars   F   Cash   Bank    Date   Particulars   F              Cash      Bank

Mar 1   Capital           3300                  Mar 2  Rent                           100

Mar 3  Pablo                             550    Mar 4  Olive                                          170

                                                               Mar 5   General Expenses    350

Mar 6   Cash          c               1500     Mar 6    Bank               c        1500

Mar 7  Sales                            3200     Mar 8   Bank                c          950

Mar 8   Cash            c               950      Mar 9    Purchases                  560

Mar 11  Commission               525     Mar 10   Purchases                             150

Mar 30   Rent                              50     Mar 12    Motor Van                           160

Mar 31   Sales             1400                 Mar 13   Drawings                     25

                                                                Mar 14   Sarah                           300    100

                                                                Mar 26   Wages                          50

                                                                Mar 27    Stationery                  100

                                                                Mar 28    Drawings                              145

                                                                                  Bal c/d                  765     6050

                                       4700  6775                                                      4700    6775

                 Bal b/d            765   6050

POSTING TO THE LEDGER:

1.     All Items on the debit side on the cashbook must be transferred to the credit side of their ledgers.

2.     All Items on the credit side of the cashbook must be transferred to the debit side of their individual ledgers.

This brings us to the end of today's session. Hope this was very helpful to you, leave a comment of what you think of this tutorial and of your questions below. Have a Blessed Day and Remember You are Amazing. God Bless.