17 October 2016

Trade discount and Cash discount

Trade Discount:
Trade discount is a consideration commonly (but not only) given by a whole seller to a retailer for purchasing bulk amount, to empower their trading interest. Trade discount do not required a double entry book keeping system, a separate discount column in the invoice is all it needs to be recorded.



18 June 2016

Cash book

Cash book is the substitute of normal cash ledger. In a normal cash ledger all transaction are recorded after passing the relevant journal entry, but unlike the normal cash ledger, all the payments and receipts are initially recorded into Cash book instead the journal. Although unlike a normal journal entry, both aspects (i.e. Debit & Credit) of a transaction are not recorded in a Cash book. It has two sides, Debit and Credit like a ledger. All receipts are recorded in the debit side and all payments are recorded in the credit side of a cash book. Hence, cash book is neither a complete journal nor a complete ledger, it is a combination of the both. It would be better if you call it just a cash book and not a journal or ledger.

Types of Cash book:

Cash book can be categorised into three types, 1. Single column cash book. 2. Double column cash book. 3. Triple column or Multi column cash book. & 4. Petty cash book.

1. Single column cash book:

A single column cash book contains 5 fields in both debit and credit sides. those are Date, Particulars, Voucher number, Ledger folio & Amount.
  • Date: In this field the actual date should be recorded, as per the debit voucher (Document of payment) or the receipt voucher (Document of receipt).
  • Particulars: In this field the relevant account should be recorded. For example- An expenses account, An income account or A personal account.
  • Voucher number (V/N): The serial number of the debit voucher or receipt voucher should be recorded here.
  • Ledger folio (L/F): The page number of the relevant ledger account should be recorded here.
  • Amount: The cash amount of the payment or receipt should be recorded here.


Date
Particulars
V/N
L/F
Amount (Rs.)
Date
Particulars
V/N
L/F
Amount (Rs.)










   Format of a Single column cash book

2. Double column cash book:

A double column cash book is same as the single column cash book, except it has a "Cash" column to record any receipt or payment made in cash and a "Bank" column to record all receipt or payment made through bank, instead of a single "Amount" column. The bank column may segregated into multiple bank accounts.



Date
Particulars
V/N
L/F
Cash
Bank
Date
Particulars
V/N
L/F
Cash
Bank
SBI
UBI
SBI
UBI














   Format of a Double column cash book

3. Triple column / Multi column cash book:

A triple/multi column cash book contains all the fields of double column cash book and an additional "Discount" column to record the discount received or allowed if any. The discount column can be formatted as "Discount allowed" In debit side & "Discount received" In credit side.




Date
Particulars
V/N
L/F
Cash
Bank
Discount Allowed
Date
Particulars
V/N
L/F
Cash
Bank
Discount Received














   Format of a Triple column cash book
 

4. Petty cash book:

In a petty cash book all petty cash payments or receipts are recorded. Petty cash is very small amount of liquid cash, used for very frequent day to day events. Petty cash can be maintain either in "Ordinary system" or in "Imprest system".
  • Ordinary system: Under this system, the petty cashier is given a lump sum amount of petty cash. When the petty cash reach the minimum level, the petty cashier is liable to report the uses of the petty cash with the extra balance if any and there after again the petty cashier is given another sump sum of petty cash for the next few days.
  • Imprest system: Imprest system of petty cash is more scientific method that the ordinary system. Under this system, the petty cashier is given a pre-defined amount of petty cash and after a certain time interval, only the amount he spend is reimbursed by the head cashier to match the same pre-defined amount.




Amount received
Cash book folio
Date
Particulars
V/N
L/F
Amount paid








   Format of a petty cash book