CASH BOOK AND BANK RECONCILIATION INDEX

 

3.0 Objectives 

        After studying this unit you should be able to: 

• Explain the need for sub-division of journal 

• Prepare different types of cash books 

• Post cash book entries into ledger 

• Ascertain the causes of difference between the cash book and pass book balances 

• Prepare a bank reconciliation statement 

• Adjust the cash book balance 

• Describe the importance of bank reconciliation statement 

• Prepare petty cash book and post it into ledger.

3.1 Introduction 

In Unit 2 you learnt that all business transactions are first recorded in the journal and then posted into ledger. In practice, the number of transactions is so large that it becomes difficult to record all of them in one book of prime entry. Hence, the journal is sub-divided into a number of special journals called Subsidiary Books. Each book is used for recording transactions ‘of one category only. For example, Cash Book is used for recording all cash transactions, Purchases Book is used for recording all credit purchases of goods, and Sales Book is used for recording all credit sales of goods, and so on. This enables us to divide the work among different persons and ensure prompt recording of transactions, In this unit you will learn about the most important subsidiary book called Cash Book. We shall discuss various types of cash books and study how transactions are recorded in each type of cash book and posted from cash book to ledger. You will also learn about the banking transactions, their recording in Three Column Cash Book and the preparation of a Bank Reconciliation, Statement.

3.2 Sub-division of Journal 

3.3 Cash Book
        3.3.1 Single Column Cash Book 
        3.3,2 Two Column Cash Book 
        3.3.3 Three Column Cash Book

3.4 Bank Reconciliation Statement
        3.4.1 Causes of Difference 
        3.4.2 What is Bank Reconciliation Statement7? 
        3.4.3 Preparation of Bank Reconciliation Statement 
        3.4.4 When then: is M Overdraft? 
        3.4.5 Adjusting the Cash Book Balance 
        3.4.6 Advantages of Bank Reconciliation Statement

3.5 Petty Cash Book
        3.5.1 Impress System 
        3.5.2 Recording and Posting the Petty Cash Book

3.6 Let Us Sum UP 
3.7 Key Words 
3.8 Answers to Check Your Progress 
3.9 Terminal Questions/Exercises