Cash Book

zaf1987zaf1987 Well-KnownPosts: 124Registered
Im working my way through Basic Accounting 1, ive done most of the module and feel comfortable however seem to
be struggling with posting the cash book into the general ledger and sales/purchase ledger.

1. Why do entries from the cashbook only need to go one entry into the general ledger, surely this contradicts the double entry method?

i.e a question in the BPP book was

The following transactions all took place on 30 June and have been entered in the side of the cash book as shown
below, no entries has yet been made in the ledgers.

Cash book - Debit Side

Date Details Vat bank
30 june henderson and co 7349
30 june cash sale 71 427

My answer was

SLCA - 7349 - credit
SALES - 355 - CREDIT
VAT - 71 - CREDIT
BANK - 7775 - DEBIT

The answer in the BPP book is all the above except the entry in the bank, no entry in the bank. How
first of all the cash sale has only been recorded on the credit side (double entry), why no debit entry? same goes for the other transaction.

7349 and 427 are payment which go into the bank account where is this recorded. ? if not in the general ledger.
I dont quite understand. this is the first hurdle ive come across and dont quite understand the logic.

Comments

  • lakshlaksh New Member Posts: 20Registered
    New to Forum

    Hi,

    I understand your problem. Even I faced the same with the cash book

    Cash sales--sold good for cash..means cash is coming into the business and goods are going out

    As per principle Debit the receiver,credit the giver.

    In this scenario Debit the cash and credit the cash sales.. While posting into the cash book do opposite entries means debit the cash sales and in sales ledger credit the cash book.

    I hope this will useful to you
  • MarkTMarkT Trusted Regular Posts: 302Registered
    zaf1987 wrote: »
    Im working my way through Basic Accounting 1, ive done most of the module and feel comfortable however seem to
    be struggling with posting the cash book into the general ledger and sales/purchase ledger.

    1. Why do entries from the cashbook only need to go one entry into the general ledger, surely this contradicts the double entry method?

    i.e a question in the BPP book was

    The following transactions all took place on 30 June and have been entered in the side of the cash book as shown
    below, no entries has yet been made in the ledgers.

    Cash book - Debit Side

    Date Details Vat bank
    30 june henderson and co 7349
    30 june cash sale 71 427

    My answer was

    SLCA - 7349 - credit
    SALES - 355 - CREDIT
    VAT - 71 - CREDIT
    BANK - 7775 - DEBIT

    The answer in the BPP book is all the above except the entry in the bank, no entry in the bank. How
    first of all the cash sale has only been recorded on the credit side (double entry), why no debit entry? same goes for the other transaction.

    7349 and 427 are payment which go into the bank account where is this recorded. ? if not in the general ledger.
    I dont quite understand. this is the first hurdle ive come across and dont quite understand the logic.

    The way I read this is:

    Henderson have paid their account of £7349 so, yes, you debit the bank and credit the SLCA therefore reducing the sales ledger and increasing the bank.

    The sales and VAT £355 & £71 are credit entries on the sales and nowhere else as there is no outstanding account as the money is already paid (cash sale)

    You don't need the BANK 7775 entry as it is already recorded in the first part of the question.
  • crispycrispy Trusted Regular SouthamptonPosts: 454Registered
    Hello,

    The reason the answer shows no debit to the bank is becuase in this scenario the cash-book is effectively making up part of the double entry system (ie: acting as the bank account).
  • zaf1987zaf1987 Well-Known Posts: 124Registered
    Hi i appreciate the replies everyone but i still dont understand,

    MarkT how is this already recorded in first part as you said?

    laksh - sorry i dont udnerstand what you mean

    crispy - I have read somewhere that cashbook is used by some business as a book of prime entry but also part of the ledger
    (replacing effectively the bank), but then would my answer not just replace debit in the bank with debit in the cashbook? does it still not need to be recorded in the general ledger?

    Again thanks for the replies but still struggling with this.

    The thing i have seen the sample questions in bpp and greenlight and att site and to be fair i probably would get the answer right, but i wouldnt be understanding it. and the reason i started on level 2 instead of level 3 is to get the understanding.
  • crispycrispy Trusted Regular SouthamptonPosts: 454Registered
    In the question the cash-book is being used as part of the the general ledger (in place of Bank A/c)

    It's as simple as that ;-)
  • MarkTMarkT Trusted Regular Posts: 302Registered
    As Crispy has said above - the question basically fills in the debit sit of the 'T' accounts already, all you have to do is give the opposing entries :)
  • zaf1987zaf1987 Well-Known Posts: 124Registered
    :)

    At work it hit me, so if a company uses the cashbook as part of general ledger the debit side is filled in and only creidt side needs to be filled in teh ledger and thus no bank t account in general ledger.

    But..... From the question how are you to know that the cash book is being used as part of general ledger and not just being used as a book of prime entry.

    thanks guys. this and b/d and b/f si the only thing i didnt get fiarly quickly in ba1.

    thanks
  • lakshlaksh New Member Posts: 20Registered
    As I said to you in my previous post is same MarkT said--All you have to do is give opposite entries
  • stevefstevef Well-Known CarmarthenPosts: 258Registered
    Traditionally the "Cash Book" has always been part of the ledger.
  • zaf1987zaf1987 Well-Known Posts: 124Registered
    I never knew the cashbook is commonly used as part of the ledger, and i guess reading question thoroughly would have helped as it says it is the debit side, so clearly part of the ledger. thank guys. i think all i have to do now is balancing
    the ledgers and im ready to do practice exams.
  • CWognumCWognum New Member Posts: 6Registered
    Also struggling

    Hi guys. I think I have understood what was said here a few years ago but I just want to clarify...

    So the 'Bank' T account in the General Ledger that we have been using previously is now no longe rin use now that we have a Cash Book. Is that right?

    The cash book replaces the Bank account in the ledger?

    Can someone confirm that I have understood this correctly

    It would be much better if they had just explained this in the book!!!! But hey
  • CeeJaySixCeeJaySix Well-Known Posts: 645Registered
    In the above example, yes. Whilst it shouldn't be taken for granted that the cashbook is part of the nominal ledger (in the real world it often isn't, especially where a business keeps a cashbook for the year then gives it to an accountant to draw up the financial statements rather than having their own accountant or finance department), it is always obvious in exams because you'll either be given a 'bank' ledger or you won't! And from memory it normally states whether or not the cashbook forms part of the double entry if it's relevant to the question. Unfortunately sometimes training provider's mock questions aren't as clear as they should be.
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