CASH BOOK

~ Dean Bloom ~
~ BloomTech Solutions ~

CASH BOOK
Entry of information
Accounting for VAT
Bank Statement Reconciliation
 

Within the cash book, you would normally record funds that are paid into, and funds that are paid out of  the bank account.
On the left hand page, money paid into the account would be entered and totalled to match the paying in slips of the paying in book or amounts paid into the bank account, while on the right hand page, funds that have gone out of the account would equally be recorded.

The cash book will then be used, at the end of a given period, to perform the "Bank Statement Reconciliation." In other words, taking the cash book balance, and making it reconcile against the bank statements. Many people already do this at home with their own statements. I have always used the following format:-

BALANCE AS PER BANK STATEMENT
ADD CREDITS IN TRANSIT (Amounts paid in, but not yet presented on the bank statements)
LESS UNPRESENTED CHEQUES (Amounts paid out, but not yet debited to the bank statements)

= BALANCE AS PER CASH BOOK or PER THE ACCOUNTS.

From the cash book, you would post each item in turn to the Nominal Ledger. Credits paid into the account on the left of the Cash Book would be DEBITED to the Bank Account. This normally confuses people when you say DEBIT the bank account to increase it, or put money into it.

The best way to think about it is like this:-

DEBITS on the left hand side of the Nominal Ledger pages or Trial Balance are amounts in your favour. CREDITS on the right hand side of the Nominal Ledger pages or Trial Balance are amounts payable or not owed to you. Be careful though, sales for example also appear on the right hand side of the nominal ledger (CREDIT) and are not money owed by you.

There are therefore, many other items which appear on the  DEBIT and CREDIT side which are not owed by you or owed to you, but these take a lot more explaining. SALES for instance is a CREDIT on the right, but is NOT necessarily the amount of money currently owed to you!

Instead, the DEBTORS CONTROL account on the left (DEBIT) is the money owed as a result of these sales.

Thus, if you DEBIT  the bank account (In book keeping terms), you are increasing it.

Also in the cash book, you could analyse the VAT and other expense accounts.
 

SALES LEDGER
Invoices
Credits
Payments Received
Allocations
Credit Control
 

PURCHASE LEDGER
Invoices
Credits
Issue Of  Payments
Allocations
Account Queries
 

NOMINAL LEDGER
Double Entry
Trial Balance
 

VAT RETURNS
 

FIXED ASSETS
Depreciation
Net Book Value
 

PROFIT / LOSS