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The document discusses cash books and bank reconciliation statements (BRS). It states that a cash book is used to record all cash receipts and payments in detail, with receipts recorded on the debit side and payments on the credit side. It also describes a two-column cash book which includes columns for cash and bank transactions. A BRS reconciles the balances in the cash book and bank passbook, identifying causes for any differences such as outstanding checks or deposits. Common causes of differences that require adjustment to the cash book balance are also outlined.
The document discusses cash books and bank reconciliation statements (BRS). It states that a cash book is used to record all cash receipts and payments in detail, with receipts recorded on the debit side and payments on the credit side. It also describes a two-column cash book which includes columns for cash and bank transactions. A BRS reconciles the balances in the cash book and bank passbook, identifying causes for any differences such as outstanding checks or deposits. Common causes of differences that require adjustment to the cash book balance are also outlined.
The document discusses cash books and bank reconciliation statements (BRS). It states that a cash book is used to record all cash receipts and payments in detail, with receipts recorded on the debit side and payments on the credit side. It also describes a two-column cash book which includes columns for cash and bank transactions. A BRS reconciles the balances in the cash book and bank passbook, identifying causes for any differences such as outstanding checks or deposits. Common causes of differences that require adjustment to the cash book balance are also outlined.
CASH BOOK I S A BOOK OF ORI GI NAL ENTRY I N WHI CH
TRANSACTI ONS RELATI NG ONLY TO CASH RECEI PTS
AND PAYMENTS ARE RECORDED I N DETAI L.
WHEN CASH I S RECEI VED I T I S ENTERED ON THE DEBI T OR LEFT HAND SI DE. WHEN CASH I S PAI D OUT THE SAME I S RECORDED ON THE CREDI T OR RI GHT HAND SI DE OF THE CASH BOOK.
CASH BOOK TWO COLUMN CASH BOOK A Two column cash book is one in which there are TWO columns on each side - debit and credit side. One is used to record cash transactions, the second is used to record bank transactions. When a trader keeps a bank account it becomes necessary to record the amounts deposited into bank and withdrawals from it. Fir this purpose one additional column is added on each side of the cash book. The main advantages of a three column cash book is that it is very helpful to businessmen, since it reveals the cash and bank deposits at a glance
CONTRA ENTRIES If an amount is entered on the debit side of the cash book, and the exact amount is again entered on the credit side of the same account, it is called "contra entry". Similarly an amount entered on the credit side of an account also may have a contra entry on the debit side of the same account.
Contra entries are passed when:
Cash is deposited into bank by office : It is payment from cash and receipt in bank. Therefore, enter on credit side, cash column "By Bank" and on debit side bank column "To Cash". Such entries are marked in the cash book with the letter "C" in the folio column Cheque/Check is drawn for office use:It is payment by bank and receipt in cash. Therefore, enter on the debit side, cash column "To Bank" and on credit side, bank column "By Cash". BRS CAN BE DEFINED AS A STATEMENT WHICH RECONCILES THE BALANCE AS PER CASH BOOK AND THE BALANCE AS PER PASS BOOK SHOWING ALL CAUSES OF DIFFERENCE BETWEEN THE TWO. BRS CAUSES OF DIFFERENCE Cheques issued but not yet presented for payment Cheques deposited into bank but not yet collected Bank charges Interest allowed by bank Interest on overdraft Amount collected by bank on standing instructions
CAUSES OF DIFFERENCE Payment made by the bank as per the standing instructions Direct payments into the bank made by firms customers Dishonour of Cheques or Bills Errors
Preparation of BRS When Starts with a Cash Book Balance:
To be added: i) Cheques issued but not yet presented ii) Interest allowed by the bank iii) Interest and dividends collected but not recorded in the cash book iv) Direct deposits by customers in the firms bank account Items to be subtracted:
i) Cheques deposited but not yet collected ii) Bank Charges iii) Interest on overdraft iv) Amounts paid by the bank under standing instructions but not recorded in the cash book v) Cheques dishonoured but no entry made in the cash book for the dishonour.