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Bdc 101 06
This document provides an overview of cash books and petty cash books. It defines a cash book as a book of original entry for cash transactions that records money paid into and out of a business bank account. It also describes the importance of cash books for safeguarding assets and ensuring accurate accounting records. The document explains petty cash books are used to record small cash payments to avoid numerous individual ledger postings. It also outlines the imprest system for controlling petty cash funds through regular reimbursements to restore the original cash float amount.
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Bdc 101 06
- 1. FINANCIAL ACCOUNTING I CHAPTER6: Cash Book & Petty Cash Book © 2010 Cosmopoint
- 2. Slide 2 of15© 2010 Cosmopoint Learning Objectives : Define cash book Explain the importance of cash book Describe cash discount Illustrate three columns cash book Define Petty Cash Book Explain Imprest system / cash float system
- 3. Slide 3 of15© 2010 Cosmopoint 1.0 CASH BOOK • Cash Book is a book of original entry for cash transactions. • Cash Book consists of: • Cash paid into the bank is any cheque received and deposited into business bank account. CASH BOOK Cash Acc Bank Acc
- 4. Slide 4 of15© 2010 Cosmopoint 1.1 IMPORTANCE OF CASH BOOK • The importance of Cash Book are: – Safeguards assets from employee theft, robbery and unauthorised used – Ensure the accuracy and reliability of accounting records – Adherences to company policies – Monitor operational efficiency – Cash Book provides instant access to your bank balances and makes reconciliation fast and easy. • Therefore, a business with many cash and cheques transactions would require to : – Bank in daily cash receipts on the same day – Use cheque or electronic transfer for all cash payments
- 5. Slide 5 of15© 2010 Cosmopoint 1.1.1 EXAMPLE OF TWO COLUMN CASH BOOK Sept 20X9 Details 1 Put capital in bank account RM10,940 2 Received cheque from Boon RM315 3 Cash Sales RM802 4 Paid rent by cash RM135 5 Banked RM50 CASH BOOK Sep 09 Details Fol Cash Bank Sep 09 Details Fol Cash Bank 1 Capital 10,940 4 Rent 135 2 Boon 315 5 Bank C 50 3 Sales 802 30 Bal c/d 617 11,305 5 Cash C 50 802 11,305 802 11,305 Oct 1 Bal b/d 617 11,305
- 6. Slide 6 of15© 2010 Cosmopoint 1.2 CASH DISCOUNT Cash Discount Trade discount (Chapter 6) Cash discount is given to buyer after credit sales in order to get the payment earlier For example, Mr Ang bought a bundle of goods for resale RM3000 on credit and promised to pay within 30 days from Johari. In order to recive the payment earlier, Johari offered Mr. Ang 10% cash discount if he pays in 15 days. Assume that Mr. Ang paid in 10 days, so = RM3000 -10%= RM3000 - RM300 =RM2700 Mr Ang will have to pay RM2700 instead of RM3000. Mr Ang received RM300 as cash discount. Trade discount is a deduction in price given to trade customer during the sales Cash discount will appeared in Cash Book Trade discount will not appeared in financial statement as it is occurred before the sales has made For example, Mr Ang bought goods in high volume for RM3000. Johari as the seller agree to give 5% of trade discounts. So, = RM3000 – 5% = RM3000 – RM150 = RM3000 – RM150 = RM2850 In financial statement, RM2850 only will be appeared. DISCOUNTS
- 7. Slide 7 of15© 2010 Cosmopoint 1.3 THREE COLUMN CASH BOOK • Three columns cash book is a cash book that consists of discounts columns. • There are two types of discounts columns: -Discounts allowed are cash discounts by a business to its customer when they pay their debt quickly -Discounts received are cash discounts by a business from its suppliers when it pays what it owes them quickly. 3 COLUMNS CASH BOOK Discount Allowed Discount Received
- 8. Slide 8 of15© 2010 Cosmopoint 1.3.1 EXAMPLE OF DISCOUNTS ALLOWED Chong owed us RM100. He pays us in cash on 2 Sept 20X9, which is within the time limit applicable for a 5% cash discount. He pays RM95 in full settlement. (RM100 – RM5 = RM95) EFFECT ACTION Cash : by RM95 Debit Cash Acc RM95 (cash column) Debtor : by RM95 Credit Chong Acc RM95 EFFECT ACTION Discounts: Debtor : by RM95 Credit Chong Acc RM5 Expenses of Discount Allowed by RM5 Debit Discount Allowed Acc RM5
- 9. Slide 9 of15© 2010 Cosmopoint 1.3.2 EXAMPLE OF DISCOUNTS RECEIVED The business owed Sunny RM400. It pays him by cheque on 3 Sept 20X9, which is within the time limit laid down by him for a 3% cash discount. The business will pay RM388 in full settlement. (RM400 – RM12 = RM388) EFFECT ACTION Cheque Bank : by RM388 Credit Bank Acc RM388 (bank column) Creditor : by RM388 Debit Sunny Acc RM388 EFFECT ACTION Discounts: Creditor : by RM12 Debit Sunny Acc RM12 Revenues of Discount received by RM12 Credit Discount Received Acc RM12
- 10. Slide 10 of15© 2010 Cosmopoint 400 Sep 1 Bal b/d RM 400 3 Discount 12 100 2 Discount 5 Sep 2 Cash RM 95 Sep 1 Bal b/d RM 100 SunnyChong Sep 3 Sunny RM 12 Discounts Received Sep 2 Chong RM 5 Discounts Allowed 1.3.3 EXAMPLE OF THREE COLUMN CASH BOOK CASH BOOK Sep 09 Details Fol Discount Allowed Cash Bank Sep 09 Details Fol Discount Received Cash Bank 2 Chong 5 95 3 Sunny 12 388 100 Sep 3 Bank RM 388 400
- 11. Slide 11 of15© 2010 Cosmopoint 2.0 PETTY CASH BOOK • A petty cash book is normally used to record small payments. • If small cash payments were entered into the main Cash Book, this item would then need posting one by one to the ledgers. Example: If travelling expenses were paid to staff on a daily basis, this could be approximately 250 postings to the staff travelling expenses account during the year. However, by using a Petty Cash Book, it would be the monthly totals for each period that need posting to General Ledger. If this was done, only 12 entries would be needed in the staff travel expenses account instead of approximately 250.
- 12. Slide 12 of15© 2010 Cosmopoint 3.0 IMPREST SYSTEM • Is a system for controlling small cash disbursements by establishing a fund at a fixed amount and regularly reimburses the fund by the amount necessary to restore the original cash flow. Period 1 RM The cashier gives the petty cashier 100 The petty cashier pays out in the period (78) Petty cash now in hand 22 The cashier now gives the petty cashier the amount spent 78 Petty cash in hand at the end of Period 1 100 Period 2 The petty cashier pays out in the period (84) Petty cash now in hand 16 The cashier now gives the petty cashier the amount spent 84 Petty cash in hand at the end of Period 2 100
- 13. Slide 13 of15© 2010 Cosmopoint 4.0 ANALYSE PAYMENT • The first step in preparing your monthly payments is to write in the cheques that you have written out of your business bank account. • Enter the total amount of the cheque in the bank column of the Cash Book. • Next, you will need to tick the cheques that have been presented on your bank statement off on your cashbook listing for that month. • The cheques that have not been ticked in the Cash Book when you are finished will be the non presented cheque for the month. • Lastly, write in any other amounts on your bank statement that are not cheques such as bank fee, interest and direct debits.
- 14. Slide 14 of15© 2010 Cosmopoint Classroom Activity 1 Prepare two columns cash book for a furniture shop according the details given below: 20X8 Transactions July 1 Started business with RM10,000 in cash, RM10,000 in bank 3 Paid rent RM300 cash 7 Gunny paid us RM2,200 cheque 10 Hudin paid us RM2,511 cheque 14 Cash sales paid directly into the bank RM588 18 Paid delivery van expenses RM685 cash 24 Paid salary to staff RM3,000 cheque 25 Paid Fairus’s account by cash RM274 31 Withdrew RM600 in cash
- 15. Slide 15 of15© 2010 Cosmopoint Cash Book July 20X8 Details Fol Cash Bank 20X8 Details Fol Cash Bank 1Capital 10,000.00 10,000.00 3Rent 300.00 7Gunny 2,200.00 18Van's Expenses 685.00 10Hudin 2,511.00 24Salary 3,000.00 14Sales 588.00 25Fairus 274.00 31Cash 600.00 31Balance c/d 8,729.00 11,711.00 10,588.00 14,711.00 10,588.00 14,711.00 1-AugBalance b/d 8,729.00 11,711.00
- 16. Slide 16 of15© 2010 Cosmopoint Classroom Activity 2 Prepare three (3) column cash book 20X9 Transactions May 1 Balances brought forward Cash RM660, Bank RM7,855 4 Received payment from Shukri RM900, to settle account amounted RM1000 by cheque 9 Cash withdrew RM65 10 Received cheque from Elvin RM550 to settle account amounted RM580 15 Paid rental RM1000 cheque 18 Cash Sales RM840 18 Bought motorbike for business use RM3,000 with cheque 22 Paid Siti RM1,750 with cheque 26 Cash Purchases RM200 28 Bought furniture paying cheque RM200
- 17. Slide 17 of15© 2010 Cosmopoint Cash Book May 09 Details Fol Discount Allowed Cash Bank May 09 Details Fol Discount Received Cash Bank 1 Capital 660.00 7,855.00 9 Cash 65.00 4 Shukri 100 900.00 15 Rental 1,000.00 10 Elvin 30 550.00 18 Motorbike 3,000.00 18 Sales 840.00 22 Siti 1,750.00 26 Purchases 200.00 28 Furniture 200.00 31 Balance c/d 1,235.00 3,355.00 1,500.00 9,305.00 1,500.00 9,305.00 1-Jun Balance b/d 1,235.00 3,355.00