Fatima College (Teacher; M.
Waithe) Citation:
31/1/2017 [Link] & [Link] (POA for C'bean 4th Ed) 1
Cash Books
The Cash Book consists of the Cash Account and the
Bank Account put together in one book. We used to
show these accounts on different pages of the ledger.
Now it is easier to put two set of account columns
together. This means that we can record all money
rec’d and paid out on a particular date on the same
page.
In the Cash Book, the debit column for cash is put next
to the debit column for bank. The credit column for
cash is put next to the credit column for bank.
Fatima College (Teacher; M. Waithe) Citation:
11/5/2015 [Link] & [Link] (POA for C'bean 4th Ed) 2
Cash Books
The following slide shows how a cash account and a
bank account would appear if they had been kept
separately. Slide #4 however, illustrates how the
transactions are shown had, instead, been kept in a
Cash Book.
Fatima College (Teacher; M. Waithe) Citation:
11/5/2015 [Link] & [Link] (POA for C'bean 4th Ed) 3
Cash
20X8 $ 20X8 $
Aug 2 T. Moore 33 Aug 8 Printing 20
5 K. Charles 25 12 C Potts 19
15 F. Huges 37 28 Office Stationery 25
30 H. Howe 18 31 Bal c/d 49
113 113
Sep 1 Balance b/d 49
Bank
20X8 $ 20X8 $
Aug 1 Capital 10,000 Aug 7 Rent 205
3 W P Ltd 244 12 F. Small Ltd 95
16 K Noone 408 26 K. French 268
30 H Sanders 20 31 Balance c/d 10,104
10,672 10,672
Sep 1 Balance b/d 10,104
Fatima College (Teacher; M. Waithe) Citation:
11/5/2015 [Link] & [Link] (POA for C'bean 4th Ed) 4
Cash Book
Cash Bank Cash Bank
20X8 $ $ $ $
Aug 1 Capital 10,000 Aug 7 Rent 205
2 T. Moore 33 8 Printing 20
3 W P Ltd 244 12 C Potts 19
5 K Charles 25 12 F Small Ltd 95
15 F Hughes 37 26 K. French 268
16 K Noone 408 28 Office Stationery 25
30 H Sauders 20
30 H Howe 18 31 Bal c/d 49 10,104
113 10,672 113 10,672
Sep 1 Bal b/d 49 10,104
Fatima College (Teacher; M. Waithe) Citation:
11/5/2015 [Link] & [Link] (POA for C'bean 4th Ed) 5
Cash Discounts
Business prefer it if their customers pay their accounts
quickly. A business may accept a smaller sum in full
settlement if payment is made within a certain period
of time. The amount of the reduction of the sum will
be known as a ‘cash discount’. The term cash discount
thus refers to the allowance given for quick payment.
The rate of cash discount is usually stated as a
percentage. Full details of the percentage allowed, and
the period within which payment is to be made, are
quoted on all sales documents by the seller.
Fatima College (Teacher; M. Waithe) Citation:
11/5/2015 [Link] & [Link] (POA for C'bean 4th Ed) 6
Discounts allowed and discounts
received
A business may have two types of discounts in its
books. These are:
1. DISCOUNTS ALLOWED: cash discounts allowed by
a business to its customers when they pay their
accounts quickly.
2. DISCOUNTS RECEIVED: cash discounts received
by a business from its suppliers when it pays what it
owes them quickly.
We can now see the effect of discounts by looking at two
examples:
Fatima College (Teacher; M. Waithe) Citation:
11/5/2015 [Link] & [Link] (POA for C'bean 4th Ed) 7
Cash Discounts : Example 1
W. Clarke owed us $100. He pays us in cash on 2
September 2012, which is within the time limit
applicable for a 5 percent cash discount. He pays $100 -
$5 = $95 in full settlement of his account.
Fatima College (Teacher; M. Waithe) Citation:
11/5/2015 [Link] & [Link] (POA for C'bean 4th Ed) 8
Cash Discounts : Example 1
Effect Acction
1. Of Cash:
Cash is increased by $95 Debit: cash account, i.e. enter $95 in
debit column of cash book.
Asset of Debtors is decreased by Credit: W. Clarke $95.
$95.
2. Of Discounts: Credit: W. Clarke $5.
Asset of debtors is decreased by
$5. (after the cash was paid there Debit: Discount Allowed Account $5.
remained a balance of $5. As the
account has been paid, this asset
must now be cancelled.)
Expense of discounts allowed
increased by $5.
Fatima College (Teacher; M. Waithe) Citation:
11/5/2015 [Link] & [Link] (POA for C'bean 4th Ed) 9
Cash Discounts : Example 2
The business owed S. Small $400. It pays him by
cheque on 3 September 2012, which is within the limit
laid down by him for a 2 ½% cash discount. The
business will pay $400 - $$10 = $390 in full settlement
of the account.
Fatima College (Teacher; M. Waithe) Citation:
11/5/2015 [Link] & [Link] (POA for C'bean 4th Ed) 10
Cash Discounts : Example 2
Effect Action
1. Of Cheque:
Asset of bank is reduced by $390. Credit: bank, i.e. entry in the credit
bank column of cash book.
Liability of creditor is reduced by Debit S. Small’s account $390.
$390.
2. Of Discounts: Debit: S. Small’s account $10.
Liability of creditor is reduced by
$10. (After the cheque was paid, a Credit: discounts received account
balance of $10 remained. As the $10.
account has been paid the liability
must now be cancelled.)
Revenue of discount received
increased by $10.
Fatima College (Teacher; M. Waithe) Citation:
11/5/2015 [Link] & [Link] (POA for C'bean 4th Ed) 11
Cash Discounts
CASH BOOK pg32
DISC'T DISC'T
DATE CASH BANK DATE CASH BANK
DETAILS FOLIO ALLOWED DETAILS FOLIO REC'D
2012 $ $ $ 2012 $ $ $
2-Sep W. Clarke SL12 5 95 3-Sep S. Small PL75 10 390
Fatima College (Teacher; M. Waithe) Citation:
11/5/2015 [Link] & [Link] (POA for C'bean 4th Ed) 12
General Ledger
Discounts Received (p.18)
2012 $
Sep 2 S. Small PL75 10
Discounts Allowed (p.17)
2012 $
Sep 2 W, Clarke SL12 5
Sales Ledger
W. Clarke (p.12)
2012 2012 $
Sep 1 Bal b/d 100 Sep 2 Cash CB32 95
2 Disc't Allowed GL17 5
100 100
Purchases Ledger
S. Small (p.75)
2012 $ 2012 $
Sep 3 Bank CB32 390 Sep 1 Bal b/d 400
3 Disc't Rec'd GL18 10
11/5/2015 13
400 400
