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LESSON 5 CASH BOOK TWO COLUMNS Sổ Tiền mặt bằng tiếng anh Tiếng anh chuyên ngành kế toán chuyên đề kế toán tiền bằng tiếng anh Cash book
LESSON 5: CASH BOOK: TWO COLUMNS AND THREE COLUMNS The objectives: After carefully studying this lesson, you should be able to: use either a two-column cash book or a three-column cash book appreciate how cash discount might arise make accounting entries in respect of cash discount INTRODUCTION In this lesson, you will see that Cash book serves two purposes; it is a book of original entry and also part of the double entry system You will learn how to record entries for discount received and discount allowed both in the cash book and in the general ledger I LAYOUTS OF CASH BOOK The Cash book combines the cash account and the bank account, using columns but still with debits on the left and credits on the right This becomes a compact and convenient way of recording the receipt and payment of money using the same rules for double – entry It also becomes easy to see at a glance movements between the two accounts There are two layouts of the Cash book: Cash book – two columns, and Cash book – three columns I.1 Cash book: two columns Dr CASH BOOK Date Account Cash name (£) Bank Date (£) Cr Account Cash name Bank (£) (£) I.2 Cash book: three columns Dr CASH BOOK Cr Date Account Discount Cash Bank Date Account Discount Cash Bank name allowed (£) (£) name (£) received (£) (£) (£) This layout can be used when there is cash discount: discount allowed and/ or discount received If there is no discount, the two-column layout will be applied II CASH DISCOUNT Cash discount is an allowance to encourage payment of accounts by debtors within a certain period This allowance is usually expressed as percentage, e.g 5%, 2ẵ%, 1ẳ% Sales of goods on credit → debtor → discount allowed Purchases of goods on credit → creditor → discount received II.1 Discount allowed Discount allowed is an allowance for debtors who pay their debts within certain time Discount allowed account is an expense account of the business It will be kept therefore in the General Ledger At the end of the trading period its balance will be transferred to the profit and loss account E.g A Smith owed the business £1,500 for the goods sold to him on May 10, Year The terms of sale allow for 3% cash discount for payment within days On May 15, Year 2, A Smith paid his debt by cheque In this example, A Smith paid his amount within required time, hence, 3% cash discount was given to him: £1,500 x 3% = £45 Therefore, A Smith needs pay only: £1,500 - £45 discount = £1,455 The entries for this transaction will appear in the books of accounts like this: Sales Year May 10 A Smith £ 1,500 A Smith Year £ Year £ May 10 Sales 1,500 May 15 Bank “ Bank 15 Discount allowed 1,455 45 Year £ May 15 A Smith 1,455 Discount allowed Year £ May 15 A Smith 45 The accounts will appear in the cash book like this: Dr Date CASH BOOK Accoun Discoun Cas t name t h (£) Bank Dat (£) e Cr Accoun Discoun Cas Ban t name t h (£) k (£) allowed received (£) (£) Year May A smith 15 1,45 45 II.2 Discount received Discount received is an amount received from creditors when paying them within required time Discount received account is an income account of the business It also will be kept in the General Ledger At the end of the trading period its balance will be transferred to the profit and loss account E.g Suppose that the business owed L Turner £2,000 for the goods bought from May 20th Year By paying within a specified time (May 23, Year 2), the business can receive a cash discount of 5% In this example, 5% cash discount was: £2,000 x 5% = £100 Therefore, the business need pay only: £2,000 - £100 discount = £1,900 The entries for this transaction will appear in the books of accounts like this: Purchases Year May 20 L Turner £ 2,000 L Turner Year £ Year 1,900 May 20 Purchases £ May 23 Bank 2,000 “ 23 Discount received 100 Bank Year May 23 L Turner £ 1,900 Discount received Year May 23 L Turner £ 100 The accounts will appear in the cash book like this: Dr CASH BOOK Cr Dat Accoun Discoun Cas Ban e t name t h (£) k (£) Date Accoun Discoun Cas Bank t name t h (£) (£) allowed (£) received (£) Year May 23 LTurner 1,90 100 The following example shows a three-column cash book for one month together with the immediate postings to the personal accounts and the end-of-the-month transfer of the totals of the discount columns to the general ledger Year Oct Balances brought forward: Cash Bank (Dr) Debtors: T Salter L Page £ 65 935 240 320 Creditors: M Thorne L Barratt 180 280 “4 We pay L barratt by cheque, after deducting 2½% cash discount 273 “7 T Salter pays us by cheque, after deducting 2½% cash discount 234 “ 10 General expenses paid in cash 43 “ 15 We pay M Thorne by cheque, after deducting 5% cash discount “ 21 Withdrew from bank for office cash “ 27 L Page pays us by cheque, after deducting 2½% cash discount 171 60 312 Dr CASH BOOK Date Account name Discount Cash Bank Date allowed (£) (£) Cr Account name (£) Discount Cash Bank received (£) (£) (£) Y7 Y7 Oct 65 935 Oct L Barratt 273 Balances b/d “ T Salter 234 “ 10 General 43 Expense “ 21 Bank C “ 27 L Page 60 “ 15 M Thorne 171 312 “ 21 Cash C 60 “ 31 Balances 82 997 c/d 14 Nov1 Balances b/d 125 1,481 82 997 16 125 1,481 SALES LEDGER T Salter Year £ Oct Balance b/d £ Year 240 Oct Bank Oct Discount allowed 234 240 240 L Page Year £ Year £ Oct Balance b/d 320 Oct 27 Bank Oct Discount allowed 320 312 320 PURCHASES LEDGER M Thorne Year £ Year £ Oct 15 Bank 171 Oct Balance b/d Oct 15 Discount received 180 180 180 L Barratt Year £ Year £ Oct Bank Oct Discount received 273 Oct Balance b/d 280 280 280 GENERAL LEDGER General Expenses Year £ Oct 10 Cash 43 Discount allowed Year Oct 31 Sundries £ 14 Discount received Year Oct 31 Sundries £ 16 Note: - You simply total the discount columns in the cash book You then transfer those totals – on the same side – to the respective discount accounts - C (in Cash C// Bank C): means contra- used where the double – entry is complete within the cash book SUMMARY The cash book is a combination of the cash accont and the bank account It shows columns for cash and bank on both sides The cash book is a book of original entry and also part of the double entry records A cash discount is given to encourage prompt payment Discount received and discount allowed are cash discounts Discount received is an income and discount allowed is an expense 5 The three-column cash book incorporates columns for discount allowed and discount received on either side The discount columns are not part of the double entry Discount columns are totalled at the end of the month I hope you will be successful! GLOSSARY bank overdraft (n) Thấu chi tiền gửi ngân hàng cash discount (n) Chiết khấu toán discount allowed (n) Chiết khấu phải trả discount received (n) Chiết khấu nhận ...I.1 Cash book: two columns Dr CASH BOOK Date Account Cash name (£) Bank Date (£) Cr Account Cash name Bank (£) (£) I.2 Cash book: three columns Dr CASH BOOK Cr Date Account Discount Cash Bank... 10 A Smith £ 1 ,50 0 A Smith Year £ Year £ May 10 Sales 1 ,50 0 May 15 Bank “ Bank 15 Discount allowed 1, 455 45 Year £ May 15 A Smith 1, 455 Discount allowed Year £ May 15 A Smith 45 The accounts... time, hence, 3% cash discount was given to him: £1 ,50 0 x 3% = £ 45 Therefore, A Smith needs pay only: £1 ,50 0 - £ 45 discount = £1, 455 The entries for this transaction will appear in the books of accounts