Recording of Transactions – II

Single and double column cash books, contra entries, the petty cash book on the imprest system, the purchases, sales and return books, and the journal proper.

Key ideas

• The cash book records receipts on the debit side and payments on the credit side; it is both a book of entry and the cash (and bank) account.
• The cash column can never show a credit balance; the bank column can, when the account is overdrawn.
• A contra entry touches both columns, cash deposited into the bank or cash withdrawn for office use, and is marked C.
• On the imprest system the petty cashier gets a fixed sum, analyses payments by head, and is reimbursed exactly what was spent.
• The purchases and sales books hold only credit purchases and credit sales of goods, at the amount after trade discount.
• Returns go to the purchases return book (debit notes sent) and the sales return book (credit notes sent to customers).
• Anything that fits no other book goes to the journal proper: the opening entry, assets bought on credit, depreciation, an old asset sold on credit.

Remember

Watch out

• Entering cash purchases, or furniture bought on credit, in the purchases book.
• Reimbursing the petty cashier the balance left instead of the amount spent.
• Showing a contra entry in only one column.
• Posting the trade discount to an account.

Worked example