Cash book entry step by step

• 1.Turn to your first receipt counterfoil for the period you are handling (day, week, month). Record, in the first column of the cash book on the far left the date of the transaction. To help keep the page neat and uncluttered, just enter the year once at the top of all the entries for that year. Do the same for the start of each new month.
• 2.Write the payer’s name in the second column (cash sales in the example opposite).
• 3.The third column is for the folio reference which you will enter later. Leave it blank at this stage.
• 4.In the fourth column (not used in example) enter the amount of any early settlement discount.
• 5.In the fifth column (cash) enter the amount of cash received, £81.00.
• 6.Now turn to your paying-in book counterfoils and do exactly the same—except for one small difference: enter the amounts in the sixth (bank) column this time. Enter in the first (date) column the date of the bank lodgement as shown on the front of the counterfoil. The date written in ink by the payer-in (the cashier) might be different from the bank branch stamp on the counterfoil; the paying-in book might have been written up the day before the lodgment, and lodged in a nightsafe at the bank after the close of business, to be paid in properly the next day. Where there is a difference, you should use the date shown on the bank’s stamp.
• 7.Turn the counterfoil for the period over and look on its reverse side. Each counterfoil represents a payment into the bank of a sum of money in cash and/or cheques; it should bear the names of people from whom the cheques have been received (the drawers). Enter in the second column of the cash book (name column) the first name from this list.
• 8.Again, the third column is for the folio reference, which you will enter later. Leave it blank for now.
• 9.Enter in the fourth column (discounts) the details of any discount allowed.
• 10.Enter in the sixth column the actual amount of the cheque.
• 11.Repeat steps 6 to 10 for all the cheques in the list.
• 12.Now enter the cash paid in to the bank, if any.
• 13.Write the word ‘cash’ in the second column (since it is the cashier who is paying it in).
• 14.Enter amount in the sixth column (bank column).

Notes

The balance of A. Frazer’s cash as at 1st August 200X was £50.00 and there was a bank overdraft of £1,100. On 2nd August a cheque was received from Edwards’ Garage for £27.88 in full settlement of its bill of £28.60. On checking, it is found that discount has been properly deducted. On the 12th a cheque was received from Razi and Thaung for £392.43 in full settlement of their a/c in the sum of £402.50, after properly deducting 2½% discount for settlement within 7 days. On the 20th a cheque was received from Morgan and Baldwyn in the sum of £560.63 in full settlement of a/c in the sum of £575.00, after deducting 2½% discount for payment within 7 days. On checking it is found that the cheque is dated 14 days after the invoice date. On the 30th £800.00 cash was drawn for wages, a cheque for £195.50 was paid to A. T. Office Supplies after deducting 2½% for payment within 28 days and a cheque for £258 was paid to F. Evans.

Write up his cash book for the month. (Worked answer below.)

• 1.No discount has been entered for Morgan and Baldwyn as they were not eligible for the discount they claimed. Only £560.63 would, therefore, be deducted from their ledger account and they would remain indebted to the firm for the remaining £14.37.
• 2.If the cheque for £195.50 takes into account a 2½% discount then the discount figure will be £5.01, since if £195.50 = 97.5% then 1% =
  
  = £2.00½ and 100% = £2.00½ × 100 = £200.50, of which 2½% = £5.01
• 3.It has been regarded as unnecessary to debit the £800 drawn from the bank to cash since it went straight out again in wages; the debit entry has, thus, been made directly to wages account.