CASH JOURNAL

By: Dilshad Jalnawalla

 Cash Book
• Cash Journal or Cash book is meant for recording all cash
transactions. It is a very important Journal of business on
account of the following reasons:
2. The number of cash transactions is quite large in every
business. The business has to pay for salaries, rent,
lighting, insurance, purchase of goods and it has to
receive cash for sales of goods and capital assets.
3. The chances of fraud being committed regarding cash are
higher as compared to other assets. A strict control is
therefore, required.
4. Cash is the nerve center of the business. Timely
payments to its creditors increases the reputation of the
business. Similarly, timely payments from its debtors
improves the financial position of the business.
 Types of Cash Book
1. Simple Cash Book
2. Two Columnar Cash Book
3. Three Columnar Cash Book
4. Multi Columnar Cash Book
5. Cash Receipts Book
6. Cash Payments Book
 Simple (Single Column) Cash Book

Dr. Simple Cash Book

Cr.
Date Particulars L Amount Date Particulars L Amount
F F
 Two (Double) Columnar Cash Book

Dr. Cash Book Cr.

Date Particulars L Discou Cash Date Particulars L Discou Cash
F nt Rs. Rs. F nt Rs. Rs.
 Three Columnar Cash Book

Dr. Cash Book Cr.

Dt Particulars L Disco C B Dt Particulars L Disco C B
F unt ash ank F unt ash ank
Rs. Rs. Rs. Rs.

Rs. Rs.
 Prepare a triple Column Cash Book from the
following transactions for the month of
November,2002 and bring down the balance for the
start of next
1. Cash in hand 2,500 8. Paid to Amarnath by cheque
2. Cash at Bank 10,000 1,450
3. Paid into Bank 1,000 9. Discount Received 50
4. Bought furniture and 10. Paid into Bank 400
issued cheque 2,000 11. Withdrawn from Bank for
5. Purchased goods for cash Private use 600
500 12. Received cheque from Patel
6. Received cash from 1,430
Mahinder 980 And Discount 13. Allowed him discount 20
allowed to him 20 14. Deposited Patels cheque
7. Cash Sales 4,000 into Bank
15. Withdrew cash from Bank
for Office use 2,000
16. Paid rent by cheque 800
TRIAL BALANCE

By - Dilshad D. Jalnawalla
 TRIAL BALANCE
• Before using the account balances to
prepare Final Accounts, an attempt is
made to prove that the total of accounts
with debit balances is in fact equal to the
total of accounts with credit balances.
This proof of the equality of debit and
credit is called a Trial Balance.
• Trial Balance is a list of account balances
taken from the ledger to test the
mathematical accuracy of the ledger as
indicated by an equality of debits and
credits.
 Objects of preparing Trial
Balance
1. Checking of the arithmetical
accuracy of the accounting entries.
2. Basis for financial statements.
3. Summarized Ledger.
 Ledger
Dr. Cash Account (Page 9) Cr.
Date Particulars J Rs. Date Particulars J Rs.
F F
2003 To Capital A/c 5 10,000 Jun By Balance c/d 10,000
Jun 9 30
10,000 10,000
Jun 30 To Balance b/d 10,000

Dr. Capital Account (Page 20) Cr.

Date Particulars J Rs. Date Particulars J Rs.
F F
Jun To Balance c/d 10,000 2003 By Cash A/c 5 10,000
30 Jun 9
10,000 10,000
Jun 30 By Balance b/d 10,000

TRIAL BALANCE (as on 30th June 2003)

Sr. Particulars L. Debit Rs Credit Rs
No. F.
1 Cash Account 10000
2 Capital Account 10,000
 Rules to be followed while
preparing Trial Balance.
1. The balances of all accounts relating to:
a) Assets; b) Expenses; c) Losses
b) Drawings; and e) Debtors,
Should be placed in the debit column of the Trial
Balance.
2. The balances of all accounts relating to:
a) Liabilities; b) Income and Revenues;
b) Gain; and d) Creditors,
Should be placed in the credit column of the Trial
Balance.
 ILLUSTRATION 1: Prepare a trial balance
from the following balances of the year
ending 2002.
• Capital 28,000
• Purchases 15,000
• Stock of Goods 4,000
• Plant 15,000
• Motor Car 8,000
• Furniture 5,000
• Discount Received 400
• Wages 8,200
• Bad-debts 400
• Creditors 6,500
• Sales 40,000
• Salaries 2,800
• Cash-at-bank 4,000
• Commission (Cr) 600
• Return Inwards 2,000
• Return Outwards 1,000
• Cash in Hand 600
• Debtors 5,600
• Rent 3,500
• General Expenses 300
• Discount allowed 300
• Interest Received 200
• Carriage 1,500
• Advertisement 500
Illustration 2
• The Balance Sheet of Rohit as on 31st March 2003 is given below

Liabilities Rs. Assets Rs.

Capital 1,00,000 Cash 42,000
General Reserve 19,000 Sundry Debtors 90,000
Sundry Creditors 25,000 Inventory 10,000
Prepaid Rent 2,000
1,44,000 1,44,000
Transactions that occurred during April,2003:
(b)Collections from debtors 88,000
(c) Payment to creditors 24,000
(d)Acquisition of inventory on credit 80,000
(e) Inventory costing Rs.70,000 was sold on credit for
85,000
(f) Recognition of Rent Expense in April 1,000
(g)Wages paid in cash in April 8,000
Prepare Ledger including opening balances and prepare Trial
 HOME WORK: Enter the following
transactions in the journal, ledger and then
prepare Trial Balance for Mr. Alpha.
• 2003 Jan
1. Started business with cash 6,000
4. Bought goods for resale 500
7. Bought Stationary 50
10.Bought goods for resale 750
12.Paid Wages 100
15.Sold goods for cash 350
16.Sold goods for cash 300
17.Paid Electricity Bill 70
19.Sold Goods for cash 350
20.Bought Stationery 80
21.Paid Wages 100
23.Bought goods for resale 200
24.Sold goods for cash 600
25.Paid Postage 80
26.Paid for Advertisement 30
31.Sold goods for cash 700
18.Paid Wages 150
• Trial Balance tally at 8,300/-
 Errors Disclosed by Trial Balance
1. Omission to post an amount in the Ledger.
2. Debit or Credit entries are not posted at all or
posted twice.
3. Debits are wrongly posted as credits and vice
versa
4. Wrong totaling of Subsidiary Books
5. Difference in amount between the entries
6. Error in computation of an account balance
7. Omission of account balance
8. Balance of an account wrongly recorded in the
trial balance
9. Errors in extraction of the trial balance
Errors Not Disclosed by a Trial Balance

1. Errors of Omission
2. Errors of Principle
3. Compensating Errors
4. Recording Wrong Amount in the books of
original entry
5. Recording both aspects of a transaction
more than once in the books of account
6. Errors in recording a transaction on the
correct side of a wrong Account
 Suspense Account
1. If it is not possible to locate the
error in spite of checking, the
difference in the Trial Balance is
transferred temporarily to an
account called Suspense Account.
2. Afterwards when the error have
been located, they can be rectified
through the Suspense Account.