The Cash Book

Revision From Previous Lesson 1. You work for Spike’s Ponies, sales are analysed into tack and clothing. Purchases are analysed by supplier account for the following transactions in the day books, use today’s date: Sold tack goods on credit to La Dauphine, £400 + VAT. Sold clothing goods on credit to SeaSpray Services, £150 + VAT. Goods returned from La Dauphine £80 + VAT. Purchase goods on credit from Tiny Bubbles Plc £1,200 inc VAT. Purchase goods on credit from Majesty £800 + VAT. 2. Transfer these over to the double entry system.

Aims of the Session The two column cash book The analysed cash book

The Cash Book Book of prime entry and part of the double entry system. Book of prime entry feeding to bank control account. Used to record bank and cash payments. Will record cash and credit sales/purchases

Uses of the Cash Book Controlled by the Cashier Receipts from: Cash sales. Trade receivables. Loans from the bank. VAT refunds. Capital introduced by the owner. Payments Cash purchases (not necessarily notes & coins). Trade payables. Expenses. Bank loan repayments VAT payments. Purchase of non-current assets. Drawings Debit Credit Controlled by the Cashier Must have adequate safeguards - Report dodgy dealings!

Layout of the Two Column Cash Book Dr Cash Book Cr Date Details Acct Code Cash Bank Money In Money Out Used for both cash and bank receipts and payments. Account code will cross reference to general ledger

Writing Up the Cash Book Fanny Wackford sets up a new business. The following transactions take place during the first month and are entered in her cash book, which is part of the double entry system: 1 June – Started business paid £10,000 into the bank. 4 June – Bought a delivery van for £7,500 paid by cheque. 7 June – Paid rent for the month £500 paid by cheque. 12 June – Transferred £1,000 from bank to cash. 18 June – Paid £500 wages in cash. 20 June – Received a loan of £2,000 from the bank 26 June – took drawings of £200 in cash. See hand out

Transfer to the Double Entry System - Capital 1 – Introduction of capital to the business: General ledger Capital Account (GL3100) Dr Cr 1 June Bank CB52 £10,000

Transfer to the Double Entry System – Non Current Assets 2 – Bought a delivery van, a non current asset: General ledger Vehicles Account (GL0750) Dr Cr 4 June Bank CB52 £7,500

Transfer to the Double Entry System – Expenses 3 – Paid rent and wages: General ledger Rent Account (GL6350) Dr Cr 7 June Bank CB52 £500 General ledger Wages Account (GL6380) Dr Cr 18 June Cash CB52 £500

Transfer to the Double Entry System – Loan Received 4 – Received a bank loan: General ledger Bank Loan Account (GL2140) Dr Cr 20 June Bank CB52 £2,000

Transfer to the Double Entry System – Drawings 5 – Took drawings from the business: General ledger Drawings Account (GL3200) Dr Cr 4 June Cash CB52 £200

Molly Todgers Complete the following cash book entries and transfer the amounts to the double entry system for Molly: 1 Apr – Balances b/d cash £300, bank £150. 4 Apr – Receives a cheque from T Wright, a trade receivable, for £98. 10 Apr – Paid a cheque to J Crane a trade payable for £265. 15 Apr – Cash purchases £275 paid in cash. 18 Apr – Paid by cheque the amount £120 to T Lewis. 22 Apr – J Jones a trade receivable settles her account, £80 in cash. 26 Apr – Cash sales £110, cheque received. 30 Apr – Balance the cash book. Amounts are transferred to the double entry system daily. Molly is not registered for VAT

Molly Todgers – SLCA SLCA Date Description Amount 4 Apr Bank – T Wright 98 22 Apr Bank – J Jones 80 Why are the entries credit entries? Check all students have the same entries

Molly Todgers - Sales Ledger Entries Entries are then made into the individual accounts of the customers. Sales ledger T Wright Dr Cr 4 Apr Bank £98 Sales ledger J Jones Dr Cr 22 Apr Bank £80

Molly Todgers – PLCA PLCA Date Description Amount 10 Apr Bank - Crane 265.00 18 Apr Bank – T Lewis 120.00 Why are the entries credit entries? Check all students have the same entries

Molly Todgers - Purchase Ledger Entries Entries are then made into the individual accounts of the suppliers. Purchases ledger J Crane Dr Cr 10 Apr Bank CB88 £265 Purchases ledger T Lewis Dr Cr 18 Apr Bank CB88 £120

Cash Sales General ledger Sales Account Dr Cr 26 Apr Bank CB88 £110

Cash Purchases General ledger Purchases Account Dr Cr 15 Apr Cash CB88 £275

Analysed Cash Book Same as the cash book, but with extra columns! Helps to record VAT, specific or expenses. Discounts allowed and received are not recorded in the cash book but as a credit note.

Layout of the Analysed Cash Book Dr Cash Book Date Details Acct Code Cash Bank VAT Cash Sales Trade Receivables Other Income Money In Cr Cash Book Date Details Acct Code Cash Bank VAT Cash Purchases Trade Payables Other Expenses Money Out

Tapley’s

Transfer the balances into the General Ledger

Dishonoured Cheques Must be taken out the bank. Reverse the transaction Debit SLCA Credit Bank

Cash and Bank Control Accounts General ledger Cash Control Account Dr Cr 1 Dec bal b/d 255 5 Dec Cash book 912 1,167 6 Dec bal b/d 138 Used when the cash book isn’t part of the double entry system. Acts as a totals account for both the cash and the bank. 5 Dec Cash Book 1,029 5 Dec Cash book 138 1,167 General ledger Bank Control Account Dr Cr 1 Dec bal b/d 875 5 Dec Cash book 1,075 1,950 6 Dec bal b/d 1,235 Using figures from Tapleys 1 Dec bal b/d 715 5 Dec Cash book 1,235 1,950

Questions?

Look Forward To: Trial balances Capital versus revenue expenditure