FINANCIAL ACCOUNT 101.

                 TWO COLUMN CASHBOOK.

Hey Guys, Happy Wednesday. It’s a new day to live and learn, and we are continuing our previous topic on Cashbook. So sit back, relax and gain knowledge today.

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are entries made in the cashbook when cash is deposited into the bank account out of cash in hand or when cash is withdrawn from the bank for office use.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 N500 was paid into the Bank.

Dr                                          Cash Book.                                          Cr

Date    Particulars  F Cash  Bank  Date  Particulars  F   Cash    Bank

Jan 1    Cash          c            500    Jan 1    Bank      c    500

Withdrawal from Bank: when there is shortage of cash in hand, money can be withdrawn from Bank.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 N800 from the Bank.

Dr                                       Cash Book                                        Cr

Date  Particulars  F  Cash  Bank   Date  Particulars  F  Cash  Bank

Jan 2   Bank           c   800               Jan 2   Cash     c              800

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 N180 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                        180

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 2012.

Mar 1- Started business with capital in cash N3000

Mar 2- Paid rent by cash N70

Mar 3- Received loan from Pablo N500 by cheque

Mar 4- We paid Olive by cheque N165

Mar 5- We paid general expenses in cash N300

Mar 6- Withdrew N1000 from cash till and paid it into the bank account

Mar 7- Cash sales paid directly into the bank N3000

Mar 8- Banked cash N900

Mar 9- Cash purchases N500

Mar 10- Bought goods by cheque N130

Mar 11- Commission received by cheque N501

Mar 12- Bought Motor Van by cheque N60

Mar 13- Cash Drawings by the Proprietor N21

Mar 14- We paid Sarah for goods bought N250. N150 in cash; N100 by cheque.

Mar 26- Wages paid in cash N35

Mar 27- Bought stationery paying by cash N75

Mar 28- Withdrew N105 from Bank for private use.

Mar 30- Rent received by cheque N45

Mar 31- Cash Sales N1000

Dr                                                    CASH BOOK                                 Cr

Date   Particulars   F   Cash   Bank    Date   Particulars   F              Cash      Bank

Mar 1   Capital           3000                  Mar 2  Rent                           70

Mar 3  Pablo                             500    Mar 4  Olive                                       165

                                                          Mar 5   General Expenses        300

Mar 6   Cash          c               1000     Mar 6    Bank               c        1000

Mar 7  Sales                            3000     Mar 8   Bank                c          900

Mar 8   Cash            c               900      Mar 9    Purchases                  500

Mar 11  Commission                 501      Mar 10   Purchases                             130

Mar 30   Rent                            45       Mar 12    Motor Van                             60

Mar 31   Sales             1000                 Mar 13   Drawings                      21

                                                           Mar 14   Sarah                           150    100

                                                            Mar 26   Wages                        35

                                                            Mar 27    Stationery                    75

                                                             Mar 28    Drawings                              105

                                                                                  Bal c/d                    949   5386

                                       4000   5946                                                      4000    5946

                                        949     5386

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 concludes our session for today, hope you had fun learning? Until we meet again, remain ever blessed.