Basic Bookkeeping Online Guide » g. Cash Book

Common Terms like Dishonored Cheque & Bank Overdraft Relating To The Cash Book

slang — Sat, 03 Nov 2007 05:56:59 +0000

Very often, we hear terms like dishonored cheque and bank overdraft.

Dishonored cheque is a cheque which, when presented, is REFUSED payment by the bank because of insufficient fund or because it is not in order.

Bank overdraft is a facility that allows the current account holder to overdraw from his account up to an agreed sum.

Hence, we cannot assume that the bank account must always have a debit balance meaning there is still cash left in the bank. At times, because of the bank given this bank overdraft facility to the business, you can see the business have overdrawn its current bank account hence resulting in a CREDIT balance which is an overdrawn balance/overdraft facility given by the bank- the credit balance means that the business is owing to its lender which is the bank.

Cash Account & Bank Account & The Cash Book

slang — Sat, 03 Nov 2007 05:52:16 +0000

Normally, Cash account and Bank account are simple to understand. Perhaps this is for the unfamiliar.

In business, the owner/responsible officer would keep a small amount of money in the office and most of the cash is kept in a current account at a bank.

Cash account simply records money kept in the OFFICE.

whilst

Bank account records kept in the current account at a bank.

Both the Cash account and Bank account are kept in the book of original entry which is the Cash Book. As described earlier, the Cash book is taken out from the ledger. Cash book is a separate item and is part of the ledger.( Cash book serves as a book of original entry for cash transactions which are recorded first into the Cash Book without going through the journal)

Cash Book

slang — Sat, 03 Nov 2007 05:11:21 +0000

If someone ask you whether the Cash book is a book of original entry- what would you say – yes or no?

The answer is Yes: Cash Book serves also as a book of original entry when information from source documents is recorded STRAIGHT/DIRECTLY into the Cash Book WITHOUT going through the journal ( the book of original entry). Why is this so? This may be attributed to the fact that the Cash Account and the Bank Account contain the largest number of entries/transaction compared to other ledger accounts hence it is specifically taken out of the ledger and recorded in another book called the Cash Book

Next, what are those source document for entries in the Cash book?

They are:

RECEIPTS that acknowledge the receipt of cash or cheque;
CASH TILL SLIPS as record for cash received from sales;
PAYING-IN-SLIP used as evidence for cash/cheque deposited into the bank;
PAYMENT VOUCHERS to authorise payments by cash or cheque and
CHEQUE COUNTERFOLS as recrd of payments by cheques.