Recording of Transactions - II

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Summary

Cash Book: Records all cash receipts and payments.
Contra Entry: A transaction recorded on both debit and credit sides of the cash book.
Balancing of Accounts: Totaling the debit and credit sides.

Mistake: Confusing cash and credit transactions in the cash book.
- Tip: Remember that cash book only records cash transactions.
Mistake: Ignoring contra entries while posting to the ledger.
- Tip: Always check for contra entries in the cash book.
Mistake: Not balancing accounts correctly.
- Tip: Ensure totals are equal and note the balance carried forward (c/d).

Double Column Cash Book: Contains columns for cash and bank transactions, with contra entries marked appropriately.

Cash Book: A book used to record all cash receipts and payments.
Journal: Basic book of original entry.
Petty Cash Book: A book used to record small cash payments.
Purchase Journal: A special journal in which only credit purchases are recorded.
Sales Journal: A special journal in which only credit sales are recorded.
Purchases Return Book: A book in which return of merchandise purchased is recorded.
Sales Return Book: A special book in which returns of merchandise sold on credit are recorded.

Contra Entry: Transaction recorded both on debit and credit side of cash book.
Balancing of Account: Means total of debit and credit side.
Posting: The process of transferring entries from the journal to the ledger.

Debit Note: Document evidencing a debit to be raised against a party for reasons other than sale on credit.
Credit Note: Prepared when a party is to be given a credit for reasons other than credit purchase.

Bank Column: Balanced similarly to the cash column; can show credit balance due to overdraft.
Contra Entries: When cash is withdrawn from the bank or deposited, it is recorded in both cash and bank columns.

Fill in the correct words and state whether statements are true or false regarding cash book and journals.

Contra Entries: Students often confuse contra entries with regular entries. Remember, contra entries involve transactions that affect both cash and bank columns in the cash book.
Balancing Accounts: Failing to balance accounts correctly can lead to discrepancies. Ensure that the total of the debit side equals the total of the credit side.
Recording Cheques: When recording cheques, students sometimes forget to note whether the cheque was deposited on the same day or later, which affects the cash and bank columns.
Dishonoured Cheques: Not recording dishonoured cheques properly can lead to inaccuracies in the cash book. Always make an entry on the credit side for the amount of the dishonoured cheque.
Interest and Charges: Students may overlook entries for bank charges or interest debited by the bank, which should be recorded on the credit side of the bank column.

Understand the Structure: Familiarize yourself with the format of the double column cash book and ensure you know how to record transactions correctly.
Practice Regularly: Work through practice questions on journalizing transactions and posting to ledgers to reinforce your understanding.
Review Key Terms: Make sure you understand key terms such as 'contra entry', 'petty cash book', and 'special purpose books'.
Use Checklists: When preparing for exams, create checklists for each type of entry to ensure you don’t miss any important steps.
Clarify Doubts: If you are unsure about any concepts, seek clarification from teachers or peers before the exam.

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