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Ca$h Book III

What are we going to learn today?

Dishonoured cheques and treatment in


Cash Book
Bank loan
Bank overdraft
A specimen cheque

Bobby Tan 50/=


Dollars Fifty only

A cheque is an order to the bank to


pay some other person a fixed sum of
money on demand.
A dishonoured cheque

Reasons for cheques being dishonoured:


(a) signature not the same as the specimen given;
(b) insufficient funds;
(c) amount in words and in figures not the same;
(d) cheque post-dated
(e) signature missing;
(f) incomplete particulars, etc..
What happen when a cheque is
dishonoured?

Reverse the entries recorded in the


Cash Book.
Dishonoured cheque

Example 1
March 1 Joe owed you $500
3 Joe gave a cheque of $500
5 Joe’s cheque was dishonoured
by the bank.

Record the entries into the Cash Book


and ledger.
Dr (IN) Cash Book Cr (OUT)
Date Particulars Discount Cash Bank Date Particulars Discount Cash Bank

2002 2002
Mar 3 Joe 500 Mar 5 Joe 500

Joe
Dr Cr
Date Particulars Amount Date Particulars Amount
2002 $ 2002 $
Mar 1 Bal b/d 500 Mar 3 Bank 500
Mar 5 Bank 500
Dishonoured cheque

Example 2
March 1 James owed you $150
7 James gave a cheque of $120 in full
settlement of his account.
Discount allowed $30
9 Jame’s cheque was dishonoured
by the bank.

Record the entries into the Cash Book


and ledgers.
Cash Book Cr (OUT)
Dr (IN)
Date Particulars Discount Cash Bank Date Particulars Discount Cash Bank
2002 2002
Mar 7 James 30 120 Mar 9 James 120

Dr James Cr
Date Particulars Amount Date Particulars Amount
2002 $ 2002 $
Mar 1 Bal b/d 150 Mar 7 Bank 120
Discount 30
9 Bank 120
Discount 30

Dr Discount allowed Cr
Date Particulars Amount Date Particulars Amount
2002 $ 2002 $
Mar 9 James 30
In pairs, discuss and complete
worksheet 3.
What happen when we
need more cash?

Bank loan Bank overdraft


Bank Loan
• a certain sum of money borrowed from the
bank

Accounting entries:
Dr Bank Account XX
Cr Bank Loan XX
Bank Loan
Example: On May 1, we borrowed $10000 from the bank.
We put the money into our bank account.
Dr Cash Book Cr
Date Particulars Discount Cash Bank Date Particulars Discount Cash Bank
2002
May 1 Bank loan 10000
Can we draw out more
cash than what we
have in the bank
account?
Yes, we can provided
our application for
overdraft has been
approved by the bank.
Usually, bank account has a debit
balance.

So when does it have a


credit balance?
When we draw on the bank
overdraft facility.
Example 1 – Bank Overdraft
2002
Jan 1 Christine’s Bank account in the cash book
shows a debit balance of $500. She has an
overdraft facility of $10 000.
Jan 10 Christine bought an office equipment for $4 000
and paid by cheque.

How much is Christine drawing on her


overdraft facility?
Is the bank account showing a debit or
credit balance?
Dr Cash Book Cr
Date Particulars Discount Cash Bank Date Particulars Discount Cash Bank
2002 $ $ $ 2002 $ $ $
Jan 1 Bal b/d 500 Jan 10 Office
31 Bal c/d 3500 Equipment 4000

Note:
Christine is drawing $3500 on her bank overdraft facility.
Christine’s bank account has a credit balance.
She can continue to draw from her current account as long as the
total credit amount does not exceed $10 000.
The overdraft facility limit is not to be recorded in the Cash
Book.
What have I learnt today?
Dishonoured cheques and treatment in
Cash Book
Bank loan
Bank overdraft