cash book and double entry

Benjamin34

Hello folks,a am just about to undertake my first exams and I am struggling with cash book as prime of entry and as part of double entry. I would be very glad if any one could help me grasp the whole concept because I am really struggling and failing this exam is the last thing I want. help please

Adele69

I'm struggling with Cash Book too, when I thought I had everything else down. It might be possible to get the 70% pass mark with scoring high in all the other questions, but am hoping to do better on CB too in a couple of weeks.

One of several parts that confuse me is the CB as book of prime entry only, or as part of double entry. In the first, there are also Bank and Cash accounts in the General Ledger so the entries balance, but in the second they don't so it looks like things won't balance.

Hope I've got that right! only got my book not my notes.

CeeJaySix

I haven't got any learning materials from level 2, so apologies if this doesn't tie in exactly, but it should give you the idea.

A prime entry document does not form part of your double-entry system - things like sales and purchase invoices or daybooks. They are just a record of a specific type of transactions.

A cashbook is (generally) a document of prime entry, but can also form part of the double-entry system.

Every cashbook should be set out with debits (receipts) on the left, and credits (payments) on the right. You might have separate columns for Cash and Bank, or separate sections, or separate books altogether - I'm not sure how AAT like to lay theirs out for exams, but it should be apparent from your learning materials or the mock exams.

Now, if the cashbook is part of the double entry, it becomes the cash and bank accounts on the general ledger. So every time you get a bank receipt, you record it as a debit in the cashbook, and put the credit to the relevant account elsewhere in the general ledger (sales or trade receivables commonly).

eg. a cashbook is kept in the finance office of an industrial machinery manufacturer. When a customer rings to make payment via card, they enter the debit on the cashbook, and make the double entry to the trade receivables account.

If the cashbook is NOT part of the double entry, there will be separate cash and bank accounts in the general ledger. All the entries in the cashbook will periodically be transferred to these accounts. This is useful as rather than having to record each individual transaction, the cashbook can be totalled daily and just the totals transferred. The key point to remember in this case is that the entries in the general ledger cash/bank accounts go on the SAME SIDE as in the cashbook. At this point you also make the double entry to the relevant account.

eg. Cashbook kept behind trade counter in a DIY store. Every time a customer comes in to settle his account with cash, it is entered in the cashbook as a debit, along with details of the customer's name etc. There is no double entry here.

At the end of each day, the total receipts are debited to the general ledger cash account. The corresponding double entry is credited to trade receivables (there will also be a sub-entry on each individual sales ledger account, which again is not part of the double entry). Every week the cashbook is reconciled to the cash and bank general ledger accounts to ensure no entries have been omitted.

I hope that makes sense of it for you.