Cash Books Special

Question 1

What’s the difference between the Cash and Bank columns?

Answer 1

The Cash column is for bank transactions that have been paid with cash: notes and coins.
The Bank column is for bank transactions that have been made or received directly in or out of the bank account: cheques, BACS etc.

Question 2

What is the difference between cash and credit transactions? Explain Cash

Answer 2

Cash transactions are:

– when money changes hands immediately
– the first time the transaction has entered the accounting system
– analysable for VAT ie. the TOTAL amount needs to be separated into the NET value of the purchase and the VAT

Question 3

What is the difference between cash and credit transactions? Explain Credit

Answer 3

Credit transactions:

– are when money is paid after a period of time
– initially account for the expense in the purchases day-book (PDB)
– show as a liability in the Purchase ledger control account (PLCA)
– are posted to the individual supplier’s accounts with the total invoice amounts, as memorandums, because that’s the amount the suppliers are owed
– are not analysable for VAT as that will have been accounted for in the PDB and does NOT need to be analysed again

Question 4

Which are the analysis columns?

Answer 4

More often than not, the headings of the analysis columns are the same as the general ledger account names. This will be useful to remember in the second part of this article as it is about how we now post our cash-book into the general, sales and purchase ledger accounts.