CASH BOOK (BOOK OF PRIME ENTRY)
Cash book is the main place where cash is controlled, controlled by a cashier
Records all receipts in and payments out by cash and cheque
• Cash balance must be debit (can’t have n
• If bank balance is credit, business is in ov
The cashier will check the cash book by
Comparing the cash balance with the money in the cash till and the bank balance with the bank statem
Advantages of cash book Disadvantages of cash book
Can detect mistakes in the cash book by counting cash Recording transactions can be time consuming
Can check bank balance with bank statement Can forget to record a transaction, have wrong
, BANK RECONCILIATION STATEMENT
Bank rec. statements outline transactions going in and out of the
account and the amount of money in the bank
They’re made from the perspective of the bank
Bank rec. statement checks that bank balance in cash book is correct
(difference can be reconciled/matched)
Bank statement and cash book might be different:
Unpresented cheque= cheque hasn’t been given to bank (shows in cash book, doesn’t show in bank sta
Outstanding lodgements= record cheque before paying into the bank or it hasn’t been processed
Cash book not updated= haven’t updated standing order, direct debit, bank charges
Bank errors= don’t enter transaction into cash book and put in bank reconciliation statement as separat
Out of date cheques= 6 month old cheques aren’t banked, need to zero transaction on cash book
Dishonoured cheques= cheque isn’t paid, need to zero the transaction
Bank charges/interest= need to add into the cash book
Importance of bank reconciliation statement
Identifies any bank errors (can notify the bank and correct it)
Is a independent accounting record, reduces the risk of fraud (see if there are unknown transactions be
Cash book is the main place where cash is controlled, controlled by a cashier
Records all receipts in and payments out by cash and cheque
• Cash balance must be debit (can’t have n
• If bank balance is credit, business is in ov
The cashier will check the cash book by
Comparing the cash balance with the money in the cash till and the bank balance with the bank statem
Advantages of cash book Disadvantages of cash book
Can detect mistakes in the cash book by counting cash Recording transactions can be time consuming
Can check bank balance with bank statement Can forget to record a transaction, have wrong
, BANK RECONCILIATION STATEMENT
Bank rec. statements outline transactions going in and out of the
account and the amount of money in the bank
They’re made from the perspective of the bank
Bank rec. statement checks that bank balance in cash book is correct
(difference can be reconciled/matched)
Bank statement and cash book might be different:
Unpresented cheque= cheque hasn’t been given to bank (shows in cash book, doesn’t show in bank sta
Outstanding lodgements= record cheque before paying into the bank or it hasn’t been processed
Cash book not updated= haven’t updated standing order, direct debit, bank charges
Bank errors= don’t enter transaction into cash book and put in bank reconciliation statement as separat
Out of date cheques= 6 month old cheques aren’t banked, need to zero transaction on cash book
Dishonoured cheques= cheque isn’t paid, need to zero the transaction
Bank charges/interest= need to add into the cash book
Importance of bank reconciliation statement
Identifies any bank errors (can notify the bank and correct it)
Is a independent accounting record, reduces the risk of fraud (see if there are unknown transactions be
