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• Contra Entries: Making entries for cash deposited into the bank and cash withdrawn from the bank.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: ₹70,000
   • Bank negative balance: ₹50,000 (Overdraft)
   • Entry:
     • By Balance b/d (Bank side): ₹50,000
     • To Balance b/d (Cash side): ₹70,000

2. January 4: Sold goods for cash

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

3. January 5: Cash deposited into bank

   • Amount: ₹80,000
   • Contra Entry:
     • To Cash (Bank side): ₹80,000
     • By Bank (Cash side): ₹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: ₹28,800
   • Entry: By Meena (Bank side): ₹28,800

6. January 8: Withdrawn from bank for personal use

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

7. Joseph Transactions:

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

8. Bank Charges and Interest: Deducted by bank

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

9. January 23: Cash received from Ramesh

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

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

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

Important Concept: Retaining Minimum Cash in Business

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

Final Balances as of January 31

• Cash Balance: ₹5,000
• Bank Balance: ₹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.