Application of The Rules With Ordinary Cash Book - SS1 Accounting Lesson Note

The double-entry bookkeeping system is a method of recording financial transactions where every transaction affects at least two accounts. The system uses a framework of rules called "double-entry rules" to ensure that every transaction is accurately recorded.

Meaning of Cash Book

Cash book is a subsidiary book that records all transactions made in cash. This is either through cash, cheque, postal orders, and bank drafts. By following the double-entry rules and recording transactions accurately in the cash book, businesses can maintain an accurate and reliable record of their financial transactions.

Format and Preparation of a cash book

The cash book has two sides, the debit side and the credit side. The debit side is where all the money received is recorded, while the credit side is where all the money paid out is recorded.

Every transaction recorded in the cash book must follow the double-entry rules. This means that every entry must have two aspects - a debit aspect and a credit aspect - that must be equal in amount. Every transaction is recorded in the cash book using the following format:

 

• The date column is where the date of the transaction is recorded.

• • The particulars column is where a brief description of the transaction is recorded.

  • The folio column is where the page number of the ledger account affected by the transaction is recorded.

  • The debit and credit columns are where the amount of money received and paid out respectively are recorded.

  Example:

  For example, if a business owner receives ₦10000 cash from a customer on 23/05/2022, the entry in the cash book will be as follows:

• In this entry, the debit aspect is ₦100 (as money has been received), and the credit aspect is ₦0 (as no money has been paid out). This entry will be posted to the ledger account for cash, where it will be recorded as a credit.

 

Similarly, if the business owner pays ₦5000 for office supplies on 13/05/2022, the entry in the cash book will be as follows:

• In this entry, the credit aspect is ₦50 (as money has been paid out), and the debit aspect is ₦0 (as no money has been received). This entry will be posted to the ledger account for office supplies, where it will be recorded as a debit.

Preparation of a single-column cash book

The following cash transactions relate to Lionheart Ventures for the month of August 2022.

                                                                                                                ₦

August 2: balance cash in hand                                                       25,600

August 5: paid rent for the month                                                   13,000

August 6: cash purchases                                                                   6250

August 12: paid electricity bills                                                          2400

August 19: paid wages to cashier                                                      5700

August 24: received cash to Joy Ade for the sale of goods             12000

August 25: paid transport expenses                                                  3000

August 26: a credit customer Musa Ventures paid cash                  11000

August 29: cash sales                                                                         9800

August 30: paid Chioma R. on account of credit purchases              5000

 

Answer:

Lionheart Ventures Cash Book

For the month of August 2022