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Illustrations · Illustration 2
Q.

Record the following transactions in a double column cash book and balance it.

Date (2017)DetailsAmount (₹)
Aug. 01Cash balance15,000
Aug. 01Bank balance10,000
Aug. 03Paid insurance premium by cheque4,200
Aug. 08Cash sales22,000
Aug. 08Cash discount750
Aug. 09Payment for cash purchases21,000
Aug. 09Cash discount700
Aug. 09Cash deposited in bank15,000
Aug. 10Telephone bill paid by cheque2,300
Aug. 14Withdrawn from bank for personal use6,000
Aug. 16Withdrawn from bank for office use14,500
Aug. 20Received cheque from John in full and final settlement and deposited the same in the bank10,700
Aug. 23Received cash from Michael6,850
Aug. 23Discount allowed150
Aug. 24Stationery purchased for cash1,800
Aug. 25Cartage paid in cash350
Aug. 25Cheque received from Kumar4,500
Aug. 28Cheque received from Kumar deposited in Bank4,500
Aug. 31Cheque deposited on Aug. 28 dishonoured and returned by the bank—
Aug. 31Rent paid by cheque4,000
Aug. 31Paid wages to the watchman in cash3,000
Aug. 31Paid cash for postage220
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✓ Free question

Cash and Bank columns are kept side by side. Deposits, office-use withdrawals and the depositing of a received cheque are contra entries (marked 'C'). Cash column totals ₹62,850, Bank column ₹40,200; closing Cash ₹16,980, Bank ₹4,700.

Concept — contra entries and dishonour

When a transaction affects both cash and bank (e.g. cash deposited into the bank, or cash drawn from the bank for office use), both columns are written and the entry is marked 'C' in the L.F. column — it is not posted separately to any ledger account. A cheque received but not deposited the same day is first entered in the Cash column; on the day it is deposited a contra entry moves it to the Bank column. If that cheque is later dishonoured, the deposit is reversed by crediting the Bank column (the party's account is debited again). Cash discount is memorandum here — not entered in the cash or bank columns of a two-column book.

Solution — Cash Book (Double Column)

DateReceiptsL.F.Cash (₹)Bank (₹)DatePaymentsL.F.Cash (₹)Bank (₹)
2017 Aug. 01Balance b/d15,00010,0002017 Aug. 03Insurance4,200
Aug. 08Sales22,000Aug. 09Purchases21,000
Aug. 09CashC15,000Aug. 09BankC15,000
Aug. 16BankC14,500Aug. 10Telephone expenses2,300
Aug. 20John10,700Aug. 14Drawings6,000
Aug. 23Michael6,850Aug. 16CashC14,500
Aug. 25Kumar4,500Aug. 24Printing & stationery1,800
Aug. 28CashC4,500Aug. 25Cartage350
Aug. 28BankC4,500
Aug. 31Kumar (cheque dishonoured)4,500
Aug. 31Rent4,000
Aug. 31Wages3,000
Aug. 31Postage220
Aug. 31Balance c/d16,9804,700
Total62,85040,200Total62,85040,200
Sept. 01Balance b/d16,9804,700
Note

Kumar's cheque (₹4,500) was received on Aug. 25 (entered in the Cash column), deposited on Aug. 28 (a contra entry into the Bank column), and dishonoured on Aug. 31 — so the bank deposit is reversed by crediting the Bank column ₹4,500 against Kumar. The book closes with cash in hand ₹16,980 and cash at bank ₹4,700.

✓Final answer

Cash column totals ₹62,850 and Bank column ₹40,200; closing balances carried down are Cash ₹16,980 and Bank ₹4,700.

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