ЁЯУТ

Day 25: Double Column Cash Book

Jul 14, 2024

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Day 25 - 100 Days Commerce Pro Series

Topic: Double Column Cash Book and Contra Entries

Key Concepts

  • Double Column Cash Book: Understanding and preparing double column cash book.
  • Contra Entries: Making entries for cash deposited into the bank and cash withdrawn from the bank.
  • Bank Overdraft: Handling and recording bank overdrafts.
  • Balance Brought Down: Differentiating between positive cash balance and negative bank balance.

Transactions for January 2018

  1. January 1: Cash in hand and bank overdraft

    • Cash balance: тВ╣70,000
    • Bank negative balance: тВ╣50,000 (Overdraft)
    • Entry:
      • By Balance b/d (Bank side): тВ╣50,000
      • To Balance b/d (Cash side): тВ╣70,000

  2. January 4: Sold goods for cash

    • Cash received: тВ╣1,20,000
    • Entry: To Sales Account (Cash side): тВ╣1,20,000

  3. January 5: Cash deposited into bank

    • Amount: тВ╣80,000
    • Contra Entry:
      • To Cash (Bank side): тВ╣80,000
      • By Bank (Cash side): тВ╣80,000
      • LF: 'C' indicating contra entry

  4. Ignored Transaction: Purchase goods from Meena (Credit transaction not recorded in cash book)

  5. January 7: Issued cheque to Meena for full settlement

    • Amount: тВ╣28,800
    • Entry: By Meena (Bank side): тВ╣28,800

  6. January 8: Withdrawn from bank for personal use

    • Amount: тВ╣50,000
    • Entry: By Drawings (Bank side): тВ╣50,000

  7. Joseph Transactions:

    • January 12: Sold goods to Ajay and received cheque for тВ╣2,50,000
    • January 17: Deposited AjayтАЩs cheque into bank
      • Chq. In Hand: тВ╣2,50,000 (Bank side)
      • Entry: To Cheque In Hand (Bank side): тВ╣2,50,000

  8. Bank Charges and Interest: Deducted by bank

    • January 20: Bank Charges: тВ╣500
    • January 22: Bank Interest: тВ╣2,500
    • Entries:
      • By Bank Charges (Bank side): тВ╣500
      • By Bank Interest (Bank side): тВ╣2,500

  9. January 23: Cash received from Ramesh

    • Amount: тВ╣8,000
    • Entry: To Ramesh (Cash side): тВ╣8,000

  10. January 28: Paid life insurance premium for Sunita (via cheque)

    • Amount: тВ╣15,000
    • Entry: By Drawings (Bank side): тВ╣15,000

Important Concept: Retaining Minimum Cash in Business

  • Retaining Balance: After calculating the cash balance, retain тВ╣5,000 in cash and deposit the remaining balance into the bank.
  • Example Calculation:
    • Total debit side (cash): тВ╣1,48,000
    • Total credit side (cash expenditures): тВ╣80,000
    • Remaining Balance: тВ╣68,000
    • Retained in business: тВ╣5,000
    • Deposited into bank: тВ╣63,000 (contra entry)
    • Entries:
      • By Bank (Cash side): тВ╣63,000
      • To Cash Account (Bank side): тВ╣63,000

Final Balances as of January 31

  • Cash Balance: тВ╣5,000
  • Bank Balance: тВ╣66,200

Upcoming Topics

  • Petty Cash Book (Wednesday's revision, Thursday's class)
  • Triple Column Cash Book

Conclusion

  • Ensure proper calculations and balancing of cash book entries.
  • Review and understand contra entries, overdrawn balances, and the significance of retaining a minimum cash balance in the business.

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