Double Entry System 2 DR CR CASH BOOK

Double Entry System 2 DR CR

CASH BOOK

Objectives At the end of the lesson, students should be able to : • know what is the purpose of a Cash Book. • draw up a Two-column and a Three-column Cash Book. • distinguish between a cash and a trade discount.

What is a Cash Book? • It forms part of the ledger book. • Contains only 2 ledger accounts: - Cash account - Bank account • It is a book of original entry without the need to go through the Journal.

Advantages of using a Cash Book Reduces the number of entries in the ledger book. One person can be in charge of the book, thus increasing efficiency. It is easier to refer to the Cash account and Bank account when using a separate book to record.

A Simple Two-column Cash Book Dr Date Two-column Cash Book Particulars Cash Bank Date Particulars Cr Cash Bank

Tell A Story… Yourself father mum

Shopping Centre What about $50? The list price is $60 ok lah.

TRADE DISCOUNT • The $60 is the list price. • The actual price that you paid was $50 after bargaining. • The Trade Discount is the difference, $10. • Do you record the Trade Discount? NO!! • Why not? We are concerned with the final actual amount to be paid for, not the original list price or the discount given after bargaining.

CASH DISCOUNT • Cash Discount, however, is to encourage early payment from debtors. • It is dependent on how early a debtor pays his debt. The earlier, the higher the amount of cash discount will be given. • Unlike Trade Discount, Cash Discount is recorded in the books. • Discount Received- If the firm received a discount for early payment to creditors. • Discount Allowed- If the firm allowed a discount on their debtors for early payment.

A Simple Three-column Cash Book Dr Date Cr Three-column Cash Book Particulars Discount Allowed DA Cash Bank Date Particulars Discount Received DR Cash Bank

Discount Allowed: Dr Discount Allowed Cr Debtors Discount Received: Dr Creditors Cr Discount Received

Can you still remember what you have learnt today?