Skip to content

Accountancy · Ch 4 — Recording of Transactions - II

Summary

Summary

  • Cash Book: A special journal that records all cash receipts and payments. It serves as both a journal and the cash account. The simplest form is the Single Column Cash Book, which has only a cash column. The Double Column Cash Book adds a bank column, recording both cash and bank transactions in one book. The Petty Cash Book records small, routine payments (e.g., postage, stationery) under the Imprest System, where the petty cashier is reimbursed to a fixed float at the end of a period.
  • Bank Column in Cash Book: When a cheque is received, it is recorded on the debit side (receipts). When deposited into the bank, no further entry is needed in the cash book. When a cheque is issued, it is recorded on the credit side (payments). The bank column balance is compared with the bank statement to prepare a Bank Reconciliation Statement.
  • Purchases Book: Records all credit purchases of goods (items bought for resale). Each entry is based on the supplier’s invoice. The total at the end of the period is posted to the debit of the Purchases Account and the credit of individual supplier accounts in the Creditors Ledger.
  • Sales Book: Records all credit sales of goods. Each entry is based on the invoice issued to the customer. The total is posted to the credit of the Sales Account and the debit of individual customer accounts in the Debtors Ledger.
  • Purchases Return Book: Records goods returned to suppliers (credit purchases). The total is posted to the debit of the Creditors Account (or individual supplier) and the credit of the Purchases Return Account.
  • Sales Return Book: Records goods returned by customers (credit sales). The total is posted to the debit of the Sales Return Account and the credit of the Debtors Account (or individual customer).
  • Journal Proper: A residual book for transactions not recorded in any special journal. Examples include opening entries, closing entries, adjusting entries, rectification entries, credit purchases/sales of assets, and transfer entries. …
Start your 14-day free trial to unlock the full solution →
← Previous · terms-introducedTerms Introduced in the ChapterNext · questions-for-practice →Q1 — Briefly state how the cash book is both journal and a ledger.