Most sales are made on credit, we looked at credit transactions in previous chapters. When sales are made on credit there is a risk of default, some debtors do not pay back. When a debt goes bad (not recovered) that bad debt is treated as a normal business expense, it therefore reduces profit. The debtor may fail to pay the whole amount or part of the debt. Double entry is: Debit Profit and Loss account Credit Debtors account

1. xd

2. CHAPTER 16
THE CASHBOOK (2 COLUMN)
In previous chapters we covered the cash account and the bank account, these
are asset accounts and they also appear in the statement of financial position
under current assets.
We are not going to discuss this now, you can go back to previous chapters for a
recap.
The cashbook consists of the bank account and the cash account in one
account. The debit side of the cashbook has the debit side of the cash account
and the debit side of the bank account.
The debit side of the cashbook is called the receipt side as all the receipts are
entered on this side.
The credit side of the cashbook has the credit side of the cash account and the
credit side of the bank account.
The credit side of the cash book is called the payment side as all the payments
are entered on this side.

3. THE FOLIO
This is the reference column, because the cashbook may contain a lot of
information, the folio may be used to help trace sources of this information.
For example, the SL means the source is the sale ledger and PL is for purchases
ledger
CONTRA ENTRY
Sometimes a transaction can involve a cash account and bank account. For
example withdrawing cash from the bank and depositing it into the cashtill or
withdrawing from the cashtill and depositing into the bank account.
EXAMPLE
20X5
January 4 Withdrew $4,200 from the bank and deposit into the cashtill.
January 7 Withdrew $1,700 from the cashtill and deposit into the business bank
account
A WORKED EXAMPLE
20X6
Oct 1 Started business by depositing $10,000 into the bank account and $4,000
cash
Oct 2 Received a cheque $2,000 from G. Style
Oct 5 Paid electricity in cash $800
Oct 7 Cash Sales $700
Oct 8 Cash Purchases $900
Oct 14 Withdrew cash from the bank for business use $1,300
Oct 24 Bought stationery in cash $600
BALANCING OFF THE CASHBOOK
Just like any other legder account. At the end of the month the cashbook need
to be balanced to determine the closing amounts, and these closing balances
are transferred to the following month.
The closing balances are called balances carried down (c/d) and opening
balances are called balances brought forward or down ( b/d)
We are using plural here because we are talking about balances of two

4. accounts, the cash account and the bank account.
Closing balance of one month becomes opening balance of the preceeding
month.
PRACTICE QUESTIONS
Enter the transactions below in the Cashbook
20X3
i. Feb 5 Started business with $20,000 in the bank account and
$11,000 in cash.
ii. Feb 7 Bought goods $5,000 paying by cheque
iii. Feb 9 Bought goods $3,000 paying in cash
iv. Feb 13 Sold goods for $5,000; cash being received
v. Feb 17 Cash Purchases $2,100
vi. Feb 19 Withdrew cash for business use $1,900
vii. Feb 23 Bought goods paying in cash $ 1,200
20X3
i. March 4 Started business with $18,000 in the bank account and
$6,000 in cash.
ii. March 7 Bought goods $6,000 paying by cheque
iii. March 9 Received a cheque from K. Noon $6,000
iv. March 11 Cash sales $5,000
v. March 15 Cash Purchases $2,300
vi. March 17 Withdrew cash for personal use $2,900
vii. March 19 Bought goods paying by cheque $ 3,200
20X3
i. April 6 Started business with $15,000 in the bank account and
$6,000 in cash.
ii. April 9 Bought goods $3,000 paying by cheque
iii. April 11 Paid R. Flash a creditor by cheque $4,000
iv. April 13 Cash Purchases $2,000
v. April 15 Cash Sales $2,300
vi. April 17 Withdrew cash till and deposit into the bank account $3,200

5. April 19 Bought goods paying in cash $1,200
20X3
i. May 6 Started business with $10,000 in the bank account and
$4,000 in cash.
ii. May 9 Bought goods $2,000 paying in cash
iii. May 12 Received $3,000 from B. Night a debtor in cash
iv. May 14 Cash sales $4,000
v. May 16 Cash Purchases $2,100
vi. May 18 Withdrew cash from the bank and put into the cash till $2,200
vii. May 21 Bought fuel in cash $900
20X3
i. June 3 Started business with $9,000 in the bank account and $3,000
in cash.
ii. June 6 Bought goods $2,000 paying by cheque
iii. June 7 Withdrew cash from the bank $2,300 and put into the cash till
iv. June 14 Cash Purchases $1,000
v. June 16 Sold goods cash being received $2,700
vi. June 19 Withdrew cash from the cash till $2,300 and deposit into the
business bank account
vii. June 21 Cash Sales $3,900

6. THE CASHBOOK (3 COLUMN)
A cashbook is referred to as a three column when it has a discount column,
cash column and a bank column
Discount allowed and discount received.
Discount Allowed
This type of discount is given by the business to its customers to encourage
them to settle their debts in time.
It is treated as a normal business expense and it is charged as an expense in the
profit and loss account.
Discount Received
The business is also a customer to other businesses because it also buys on
credit. When a business buys on credit from another business, it is also given
discount when it settles its debts in time.
Discount received is an income to the business and it is added to gross profit in
the profit and loss account and it increases profit.
Example
20X6
Jan 1 Opening Balances:
J. Smith(debtor) $3,400
O. Night (creditor) $3,200
Jan 6 J. Smith settled his account by cheque less 3% cash discount.
Jan 8 Settled the account of O. Night by cheque and received a cash discount
of 5%

7. 20X6
Jan 1 Opening Balances:
J. Smith(debtor) $3,400
O. Night (creditor) $3,200
Jan 6 J. Smith settled his account by cheque less 3% cash discount
Jan 8 The business settled the account of O. Night by cheque and received a
cash discount of 5%
$3,400 X 3% = $102
$3,200 X 5% = $160
Therefore instead of paying $3,400 J. Smith will pay ($3,400 -$102) $3,298
And the business will pay O. Night ($3,200- $160) $3,040
This is how the accounts will look

8. This is how the cashbook will look
*Note: When asked to prepare a cashbook you just prepare a cashbook, all
these extra accounts were opened for demonstration purpose only. In exams
they will tell you the type of cashbook they want you to prepare, whether two
column or three column.
*Note: Discount allowed is entered on the debit side of the cashbook while
discount received is entered on the credit side of the cashbook.
ABOUT THE AUTHOR
Davie Kaliu was born and raised in Malawi, a country
in the southern part of Africa.
He is married to Lucina and together they have three
children, two boys; Tony and Davie Jr, and a girl
Evalister. He also looks after three high school
children.
He studied accounting and spent early years of his
carrier as a high school accounting teacher.
When he is not writing books, he is writing poetry or
growing vegetables
He has plans to write computer and fiction books.
More books coming your way, get ready.
+265 881123815
kaliudavie2018@gmail.com
dkaliu@yahoo.com
Also by the same author
 Double entry book keeping using T accounts.
 Revenue and Expenditure.
 Drawings.
 Balancing off the accounts.
 Balancing off the accounts using Microsoft excel
 Final accounts of a sole trader.
 Preparation of final accounts using Microsoft excel
 Depreciation of fixed assets.
 Bad debts and Provision for bad debts.
 The cashbook.
 Preparation of cashbook using Microsoft excel.
 The petty cashbook.
 Preparation of Petty cashbook using Microsoft excel.
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