Chapter 9 - Cash Book

Question 1

What is the cash book?

Answer 1

It is used to record the money transactions of a business. It is a BOOK OF PRIME ENTRY for bank receipts and payments.

Question 2

What are the 2 ways that the cash book is used in the accounting system?

Answer 2

• The cash book combines the roles of the books of prime entry and double-entry bookkeeping
• The cash book is the book of prime entry only and a separate bank account is kept in the GENERAL LEDGER in order to complete double-entry bookkeeping.

Question 3

What are the 2 things a cash book records for the money transactions of the business?

Answer 3

1. ) Receipts - FROM CASH SALES, TRADE RECEIVABLES, LOANS FROM THE BANK, VAT refunds and CAPTIAL introduced by the owner
2. ) Payments - CASH PURCHASES, TRADE PAYABLES, EXPENSES, BANK LOAN REPAYMENTS, VAT payments, ASSETS and DRAWINGS

Question 4

What are the 6 things the cashier does with the cash book?

Answer 4

1. ) Records RECEIPTS and PAYMENTS through the bank
2. ) Makes PAYMENTS and prepares CHEQUES and BANK TRANSFERS
3. ) Pays Cash 4.) Has control over the business’s cash
4. ) Issues cash to the petty cashier, who controls the PETTY CASH BOOK
5. ) Checks the cash’s accuracy and bank balances

Question 5

What is capital?

Answer 5

The amount of money invested in the business by the owner.

Question 6

What are the accounting entries for CAPITAL?

Answer 6

DEBIT cash book, bank or cash column

CREDIT Capital Account

Question 7

What are non-current assets?

Answer 7

Items purchased by a business for use on a long-term basis.

Question 8

What are some examples of Non-Current Assets?

Answer 8

Premises, Vehicles, Machinery and Office Equipment

Question 9

What ledger are separate accounts for non-current assets put in?

Answer 9

The General Ledger

Question 10

What does Non Current Assets do in each column, being DEBIT and CREDIT?

Answer 10

DEBIT - Non Current Asset account

CREDIT - Cash Book BANK or CASH column

Question 11

What are expenses?

Answer 11

Day to Day expenses, Revenue Expenditure, such as rent, wages, electricity, telephone, vehicle running expenses etc.

Question 12

What are the accounting entries for PAYMENTS FOR EXPENSES?

DEBIT or CREDIT?

Answer 12

DEBIT - Expense Account

CREDIT - Cash book, BANK or CASH column

Question 13

What are the ACCOUNTING ENTRIES when a business receives a LOAN?

Answer 13

DEBIT - Cash book, BANK column

CREDIT - Loan Account ( in the name of the lender )

Question 14

What are the ACCOUNTING ENTRIES when a LOAN REPAYMENT occurs?

Answer 14

DEBIT - Loan Account

CREDIT - Cash Book, Bank column

Question 15

What are drawings?

Answer 15

The term used when the owner takes money from the business for personal use.

Question 16

What are the ACCOUNTING ENTRIES for DRAWINGS?

Answer 16

DEBIT - Drawings Account

CREDIT - Cash Book, Bank or Cash Column

Question 17

For an analysed cash book, What are the 2 analysis columns?

Bonus Question - What are the specific parts in the analysis columns?

Answer 17

Receipts and Payments

BQ

Receipts - Cash Sales, VAT on CASH sales and other income, RECEIPTS from TRADE RECEIVABLES in the SALES LEDGER

Payments - Cash Purchases, VAT on cash purchases and other expenses, Payments to TRADE PAYABLES in the PURCHASES LEDGER

Question 18

What are the 2 ways the cash book can fit into the accounting system?

Answer 18

• The cash book can perform the function of a double-entry account I.E A debit made in the CASH BOOK is on CREDIT of another double-entry account
• The cash book is a BOOK OF PRIME ENTRY, which is separated into 2 double - entry accounts: CASH and BANK account, which are used in the general ledger.