How do you decide whether a transaction goes in the cash account or the bank account?

Use the cash account when physical money changes hands. Use the bank account when no physical money is involved, such as a bank transfer, a cheque, a standing order or a direct debit.

True or False? Paying a supplier by cheque is entered in the cash account.

False. A cheque involves no physical money , so it is entered in the bank account. Only transactions where notes and coins change hands go in the cash account.

Which two transactions are entered in both the cash and the bank accounts?

Depositing cash from the business into the business bank account, and withdrawing cash from the bank for business use. Both move money between the two accounts rather than in or out of the business.

Give two benefits of a business keeping cash on the premises.

Keeping cash lets the business: pay for purchases or expenses immediately deal with suppliers who require cash payment keep trading through power cuts and internet outages

Give two limitations of a business keeping cash on the premises.

Cash held on the premises: can be stolen or lost earns no interest , unlike money left in the bank needs someone to manage it and the cash columns of the cash book

Which two ledger accounts does the cash book contain?

The cash account and the bank account, kept side by side. That is why it has separate cash and bank columns on each side.

What are the three money columns on each side of the cash book?

Discount , cash and bank . Each side of the cash book carries all three.

In the cash book, when do you debit an account and when do you credit it?

Debit when the business is receiving money, and credit when it is losing money. That is the same rule as for any other asset account.

Define a contra entry .

A contra entry is a transaction entered on both sides of the cash book, in the cash column on one side and the bank column on the other. It arises when money moves between the till and the bank.

Why can the bank balance sit on either side of the cash book when the cash balance cannot?

A bank account can be overdrawn , which makes it a liability and gives it a credit balance. Cash in hand cannot fall below zero, so it stays an asset with a debit balance.

True or False? In a contra entry, the details column names the same account as the column the amount sits in.

False. The details column names the other account. An amount in the cash column has details reading bank , and an amount in the bank column has details reading cash .

Which two transactions produce a contra entry in the cash book?

Withdrawing cash from the bank for business use, which debits cash and credits bank. Depositing cash into the bank, which debits bank and credits cash.

How do you balance the cash and bank columns of the cash book?

Balance each pair of columns separately , exactly as you would any other ledger account, ignoring the other columns. The cash balance always comes down on the debit side, while the bank balance can come down on either.

True or False? The discount columns of the cash book are balanced in the same way as the cash and bank columns.

False. The discount columns are only totalled , never balanced. The two totals will usually be different, because discount allowed and discount received have nothing to do with each other.

Where does the total of the discount allowed column go?

Debit the whole total to the discount allowed account, labelling the entry cash book . The individual amounts are then credited to the relevant trade receivables accounts.

Where does the total of the discount received column go?

Credit the whole total to the discount received account, labelling the entry cash book . The individual amounts are then debited to the relevant trade payables accounts.

Is the cash book part of the double entry system for discount?

For discount the cash book acts only as a book of prime entry , which is why the totals must be posted out to the discount accounts separately. For its cash and bank columns it is part of the double entry system itself.

The cash column has debit entries of $320 and credit entries of $200. What is the balance c/d, and on which side?

The balance c/d is $120 , on the credit side, because that side has the smaller total. It then comes down on the debit side as the opening cash balance.

Define the petty cash book .

The petty cash book records transactions involving small amounts of cash . Each business decides what counts as a small amount, commonly anything up to $75 or $100.

What is recorded on the debit side of the petty cash book, and what on the credit side?

The debit side shows cash received , including the opening balance and any top-up from the cash or bank account. The credit side shows cash paid out , for small expenses and small amounts to trade payables.

True or False? The balance brought down in the petty cash book is always on the debit side.

True. Petty cash is an asset , so its balance is always a debit . The balance c/d therefore goes on the credit side, which normally has the smaller total, and comes down on the debit side.

What are the analysis columns of the petty cash book for?

They split the payments on the credit side into categories, such as travel, office expenses and ledger accounts. That lets the total of each column be posted to its ledger account in a single entry.

Define the imprest system .

The imprest system restores the petty cash float to a fixed imprest amount at the start of each period. If the balance has fallen below it the float is topped up, and if it is above the excess is paid back into the cash or bank account.

How are the analysis column totals dealt with at the end of the period?

Each expense column total is transferred to its ledger account as a single entry. The ledger accounts column is the exception: those amounts must be posted to the individual accounts separately.

Give two advantages of using an imprest system.

An imprest system: sets a limit on how much cash can be spent helps managers monitor how much petty cash is going out limits how much cash could be mislaid or stolen

The imprest amount is $200, vouchers for the month totalled $120 and $50 cash was received. How much restores the imprest?

$70 is needed. Find the net amount that left the account: $120 − $50 = $70 , and that is what must be paid back in.

IGCSEAccountingCambridge (CIE)Flashcards2. Sources & Recording of DataThe Cash & Petty Cash Books

The Cash & Petty Cash Books (Cambridge (CIE) IGCSE Accounting): Flashcards

Exam code: 0452 & 0985

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How do you decide whether a transaction goes in the cash account or the bank account?

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Cards in this collection (30)

How do you decide whether a transaction goes in the cash account or the bank account?
Use the cash account when physical money changes hands. Use the bank account when no physical money is involved, such as a bank transfer, a cheque, a standing order or a direct debit.
True or False?
Paying a supplier by cheque is entered in the cash account.
False.
A cheque involves no physical money, so it is entered in the bank account. Only transactions where notes and coins change hands go in the cash account.
Which two transactions are entered in both the cash and the bank accounts?
Depositing cash from the business into the business bank account, and withdrawing cash from the bank for business use. Both move money between the two accounts rather than in or out of the business.
Complete the sentence about the owner taking money from the till:
The owner taking money from the till for personal use is entered in the $______$ account.
The completed sentence is:
The owner taking money from the till for personal use is entered in the cash account.
Give two benefits of a business keeping cash on the premises.
Keeping cash lets the business:
- pay for purchases or expenses immediately
- deal with suppliers who require cash payment
- keep trading through power cuts and internet outages
Give two limitations of a business keeping cash on the premises.
Cash held on the premises:
- can be stolen or lost
- earns no interest, unlike money left in the bank
- needs someone to manage it and the cash columns of the cash book
Which two ledger accounts does the cash book contain?
The cash account and the bank account, kept side by side. That is why it has separate cash and bank columns on each side.
What are the three money columns on each side of the cash book?
Discount, cash and bank. Each side of the cash book carries all three.
Complete the sentence about the cash book's discount columns:
Discount $______$ is recorded on the debit side, and discount $______$ on the credit side.
The completed sentence is:
Discount allowed is recorded on the debit side, and discount received on the credit side.
In the cash book, when do you debit an account and when do you credit it?
Debit when the business is receiving money, and credit when it is losing money. That is the same rule as for any other asset account.
Define a contra entry.
A contra entry is a transaction entered on both sides of the cash book, in the cash column on one side and the bank column on the other. It arises when money moves between the till and the bank.
Why can the bank balance sit on either side of the cash book when the cash balance cannot?
A bank account can be overdrawn, which makes it a liability and gives it a credit balance. Cash in hand cannot fall below zero, so it stays an asset with a debit balance.
True or False?
In a contra entry, the details column names the same account as the column the amount sits in.
False.
The details column names the other account. An amount in the cash column has details reading bank, and an amount in the bank column has details reading cash.
Which two transactions produce a contra entry in the cash book?
Withdrawing cash from the bank for business use, which debits cash and credits bank. Depositing cash into the bank, which debits bank and credits cash.
How do you balance the cash and bank columns of the cash book?
Balance each pair of columns separately, exactly as you would any other ledger account, ignoring the other columns. The cash balance always comes down on the debit side, while the bank balance can come down on either.
True or False?
The discount columns of the cash book are balanced in the same way as the cash and bank columns.
False.
The discount columns are only totalled, never balanced. The two totals will usually be different, because discount allowed and discount received have nothing to do with each other.
Where does the total of the discount allowed column go?
Debit the whole total to the discount allowed account, labelling the entry cash book. The individual amounts are then credited to the relevant trade receivables accounts.
Complete the sentence about the bank balance in the cash book:
The bank balance is brought down on the credit side if the business is $______$ .
The completed sentence is:
The bank balance is brought down on the credit side if the business is overdrawn.
Where does the total of the discount received column go?
Credit the whole total to the discount received account, labelling the entry cash book. The individual amounts are then debited to the relevant trade payables accounts.
Is the cash book part of the double entry system for discount?
For discount the cash book acts only as a book of prime entry, which is why the totals must be posted out to the discount accounts separately. For its cash and bank columns it is part of the double entry system itself.
The cash column has debit entries of $320 and credit entries of $200. What is the balance c/d, and on which side?
The balance c/d is $120, on the credit side, because that side has the smaller total. It then comes down on the debit side as the opening cash balance.
Define the petty cash book.
The petty cash book records transactions involving small amounts of cash. Each business decides what counts as a small amount, commonly anything up to $75 or $100.
What is recorded on the debit side of the petty cash book, and what on the credit side?
The debit side shows cash received, including the opening balance and any top-up from the cash or bank account. The credit side shows cash paid out, for small expenses and small amounts to trade payables.
True or False?
The balance brought down in the petty cash book is always on the debit side.
True.
Petty cash is an asset, so its balance is always a debit. The balance c/d therefore goes on the credit side, which normally has the smaller total, and comes down on the debit side.
What are the analysis columns of the petty cash book for?
They split the payments on the credit side into categories, such as travel, office expenses and ledger accounts. That lets the total of each column be posted to its ledger account in a single entry.
Define the imprest system.
The imprest system restores the petty cash float to a fixed imprest amount at the start of each period. If the balance has fallen below it the float is topped up, and if it is above the excess is paid back into the cash or bank account.
How are the analysis column totals dealt with at the end of the period?
Each expense column total is transferred to its ledger account as a single entry. The ledger accounts column is the exception: those amounts must be posted to the individual accounts separately.
Complete the sentence about the imprest amount:
The imprest amount always equals the current petty cash balance, plus the total value of petty cash $______$ , minus the total cash $______$ .
The completed sentence is:
The imprest amount always equals the current petty cash balance, plus the total value of petty cash vouchers, minus the total cash received.
Give two advantages of using an imprest system.
An imprest system:
- sets a limit on how much cash can be spent
- helps managers monitor how much petty cash is going out
- limits how much cash could be mislaid or stolen
The imprest amount is $200, vouchers for the month totalled $120 and $50 cash was received. How much restores the imprest?
$70 is needed. Find the net amount that left the account: $120 − $50 = $70, and that is what must be paid back in.

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