1

Accounting – notes
Cash book, Petty cash book, Imprest system

1. Define cash book.

It is a book of prime entry because it is written up from the documents.
It is a part of the double entry system as it acts ledger accounts for cash and bank.

2. List down three types of cash book.

Single column cash book.
Double column cash book.
Triple column cash book.

3. Define contra entry.

Contra entry is one which appears on both sides of the cash book.

4. List down three differences between trade discount and cash discount.
Trade discount Cash discount
Given to encourage bulk purchase Given to encourage prompt payment
Given at the point of purchase or sales Given at the point of payment
No record of trade discount in the ledger Discount allowed recorded as an expense
and it is not part of the double entry and discount received recorded as an
income in the ledger

5. Define petty cash book.

A petty cash book is maintained to record small expenses such as postage, stationery,
and telegrams.

6. List down two types of petty cash book.

Imprest petty cash book.
Columnar or analytical petty cash book.
 2

7. List down three advantages of petty cash book.

Reduce number of entries in the cash book.
Provide valuable training for a junior member of staff.
Allows chief cashier to concentrate on more important task.

8. Define imprest system.

The imprest system of petty cash is where the amount spent each period is restored so
that cashier starts each period with the same amount.

9. List down three advantages of imprest system.

Prevention of fraud.
Under this system the chief cashier is aware of exactly how much petty cash has been
spent in each period.
Petty cash expenditure can be controlled.

Book of prime (original) entry and their source documents

Book of prime (original) entry Source document

Cash book Cheque counterfoil
Petty cash book Voucher
Sales journal Sales invoice
Sales return journal Credit note
Purchase journal Purchase invoice
Purchase return journal Debit note
General journal / Nominal journal Voucher

1. State one transaction recorded in the general journal.

Purchases.

Balance of ledger account

Accounts Balance
 3

Asset Debit
Liability Credit
Capital Credit
Drawings Debit
Purchase Debit
Sales Credit
Purchase return Credit
Sales return Debit
Income Credit
Expense Debit

3.3 Bank reconciliation statements

1. List down two reasons why the bank account and the bank statement may differ.
Timing difference in the recording of transactions.
Error in recording by one party.

2. List down three purpose of preparing bank reconciliation statement.

To reconcile the difference between the cash book balance and its bank records to
assure that the difference in values are due to legitimate reasons.
To deter internal staff from commuting fraud.
To identify any errors in the bank statement or the cash at the bank account during the
reconciliation process.

3. Complete the table below about the differences between cash book and bank
statement.
Cash book Bank statement
Entries in the cash book not found in the Entries on the bank statement not found
bank statement (the bank is unaware or on the cash book (the business is
has not recorded) unaware and has not recorded)
Debit entries in the Debit entries in the Credit entries in the Debit entries in the
cash book cash book bank statement bank statement
Cheques deposited Cheques paid to Standing orders, Credit transfers
by the business but trade/other example: insurance (receiving payment
not yet recorded by payables but not premium. electronically)
the bank, example: yet presented at Bank charges Dividends
due to public the bank. Interest charged deposited directly
 4

holidays (unpresented Dishonoured into the bank

(uncredited cheque) cheque account
deposits) Interest received
Recorded in the bank reconciliation Recorded in the Recorded in the
statement to tally with updated balance credit (-) column of debit (+) column of
from the cash book. the cash book. the cash book.

4. Complete the table below about the items in the cash book but not in the bank
statement and items in the bank statement but not in the cash book.
Items in the cash book but not in the bank Items in the bank statement but not in the
statement cash book
Cheques not yet presented (unpresented Bank charges and bank interest
cheque)
Amounts not yet credited (uncredited Dishonoured cheque
deposits)
Errors in cash book Standing orders
Credit transfers
Direct debits
Errors on bank statement
Dividends

5. Define bank charges.

Monthly service charges.
Charges for cheque book.

6. Define dishonoured cheque.

Cheques which are returned unpaid because of insufficient fund or post-dated.
A cheque which is found to be worth nothing.

7. Define credit transfer.

Trade receivables pay directly into the bank electronically.

8. Define standing order.

Business instruct bank to make payment at given dates on its behalf.
 5

9. Define unpresented cheque.

The cheques issued to someone but not presented to the bank for collecting money.

10. Define interest received.

Interest earned on deposits.

11. Define interest charged.

Interest charged on overdraft.

12. Define direct deposit.

An amount paid by someone direct into our bank account.

13. Define direct debits.

Where we give permission for an organization to collect amounts owing direct from our
bank account.

14. Define uncredited deposits.

A cheque received from someone and deposited into the bank account but not cleared
and credited.

15. Why is it credit balance in the bank = debit balance in the bank?
This is because the bank and the business take an opposite point of view.
When the business deposits money into the bank, bank owes the business.
Hence the bank treats the business as a liability (credit balance)

16. What does the ending balance in the bank reconciliation statement tally with?
Debit balance in the cash at bank account (bank column in cash book)

17. Draw the format of bank reconciliation statement.

 6

First format:
Bank reconciliation statement
For the month ending 31 December 2022
$ $
Balance as per updated xxx
(adjusted) cash book
Add: unpresented cheque:
X xx
Y xx xxx
xxxx
Less: uncredited deposits /
unrealised cheque:
X xx
Y xx (xxx)
Balance as per bank xxx
statement

Second format:
Bank reconciliation statement
For the month ending 31 December 2022
$ $
Balance as per bank xxx
statement
Add: uncredited deposits /
unrealised cheque:
X xx
Y xx xxx
xxxx
Less: unpresented cheque:
X xx
Y xx (xxx)
Balance as per updated xxx
(adjusted) cash book

Control accounts

1. Name the book of prime entry which would use to obtain the following information’s
when preparing sales ledger control account.
Item Book of prime entry
Returns Sales return journal
Discount allowed Cash book
 7

Interest charged to customer on overdue General journal

account
Contra entry General journal

2. Define control account.

Control account are also known as total accounts.
If the trial balance fails to balance and the error cannot be readily located, it is
necessary to check all the accounting records.

3. List down three advantages of control account.

Assist in location errors when the trial balance fails to balance.
Proof of the arithmetical accuracy of the ledgers they control.
Draft financial statement can be prepared quickly because of the balance provided by
the control accounts.

4. List down two types of control account.

Sales ledger control account.
Purchase ledger control account.

5. Define sales ledger control account.

This is also referred to as a total trade receivables account.
This account resembles the account of a credit customers.
It contains transactions relating to all the debtors.

6. Define purchase ledger control account.

This is also referred to as a total trade payables account.
This account resembles the account of a credit supplier.
It contains transactions relating to all the creditors.

7. Draw the diagram of a sales ledger control account (total trade receivables account)
 8

Sales ledger control account (Total trade receivables account)

Date Details $ Date Details $
2022 Jan 1 Balance b/d xxx 2022 Jan 1 Balance b/d xxx
(if
mentioned)
31 Credit sales xxx 31 Bank/Cash xxx
(Receipts)
31 Cash refund xxx 31 Irrecoverable xx
debts (bad
debts)
31 Bank: xx 31 Discount xx
dishonoured allowed
cheques
31 Interest on xx 31 Sales return xx
overdue (return
accounts inward)
31 Balance c/d xx 31 Contra (PL xxx
(credit set off)
balance)
31 Balance c/d xxx
Feb 1 Balance b/d xxx Feb 1 Balance b/d xx

8. Draw the diagram of purchases ledger control account (total trade payables account)
Purchases ledger control account (Total trade payables account)
Date Details $ Date Details $
2022 Jan 1 Balance b/d xxx 2022 Jan 1 Balance b/d xxx
(if
mentioned)
31 Bank/Cash xxx 31 Credit xxx
(Receipts) purchases
31 Contra (SL xxx 31 Interest on xxx
set off) overdue
accounts
31 Discount xxx 31 Cash refund xxx
received
31 Purchase xxx 31 Balance c/d xxx
returns (debit
(returns balance)
outward)
31 Balance c/d xxx
xxx xxx
Feb 1 Balance b/d xxx Feb 1 Balance b/d xxx

9. List down four reasons why credit customer’s account may show a credit balance.
 9

An overpayment by the customer.

The customer returning goods after paying the account.
The customer paying in advance for the goods.
Cash discount not being deducted before payment was made.

10. List down four reasons why credit supplier’s account may show a debit balance.
An overpayment to the supplier.
Returning goods to the supplier after paying the account.
Paying the supplier in advance for the goods.
Cash discount not being deducted before payment was made.

11. Define contra entries in control accounts.

Contra entries are also known as inter- ledger transfer or set offs.
It may happen that a business sells goods to another business and also buys different
goods from that business.