As the business grow up, the business/firm seems there are necessities of having sometimes to keep their money safe therefore, they usually open the account at bank.
Normally, current account is the kind of account which is preferable by the business owners because;
- It allows to deposit at any time.
- Withdraw even if your account has no enough money/balance (overdraft). You may withdraw more money than what they have.
- Enable to pay his creditors by means of cheque and to collect also from business debtors direct to the bank.
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The bank do service by charging the business trader a little cost/fee called bank charges also the issues to the customer bank statement whenever they need or at the end of the month for verifications.
To keep track day to day transactions record business need to bank account whereby two column cash book needed to bank as to maintain two account at once thus cash account and bank account in the same book instead of maintain separate account.
The format of two column cash book
Contra Entries;
Is the French word means opposite/against, means debit and credit done in the same book.
Is where the completion of double entry done in the same book.
Example of the contra entries are:
- If business withdraw cash from bank for office use.
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Dr; Cash a/c.
Cr; bank a/c.
- Deposit Cash into bank a/c.
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Dr; Bank a/c.
Cr; Cash a/c.
Therefore, to indicate the Contra by use “C” as a symbol in the follow column against the entries as both sides of the cash book.
Example.1
June 1 Balance of Cash in hand 500
Balance at Bank 10,000
2 Received Cash from Mayo 250
3 Paid Chacha by cheque 1,200
4 Received cheque from Minza and banked it 300
6 Received cash from Lily 120
10 Paid rent by cheque 500
15 Paid wages by cash 200
18 Paid cash to bank 100
20 Drew Cash from bank for office use 200
Enter the above transactions in the Cash book and carry down the balance as at 25th June.
Solution
EXERCISE.1
Record the following in the Cash booking of Masai
Feb 1 Opening balance cash Tshs 6,000 Bank Tshs 13,000
4 Paid wages in cash Tshs 1,200
5 Cash sales Tshs 3,000
10 Bought goods by cheque Tshs 1,800
11 paid rent by cheque Tshs 600
19 sent John a cheque for Tshs 600
25 Withdraw Tshs 300 Cash for himself.
Balance off the Cash book and bring down the balance for March.
EXERCISE.2
Record the following in the Cash book of Mwanadada.
April 1 Capital Cash Tshs 4,000 bank 12,000
3 Received Tshs 3,500 cash from Baraza
8 Mwita sent a cheque for Tshs 1,400
13 Paid rent cash Tshs 600
15 Sales by cheque Tshs 11,400
18 Purchases by cash Tshs 1,400
21 Sales by cheque 8,000
26 Purchases by cheque Tshs 10,000
28 Peter paid us Tshs 3,000 cash
29 Paid wages cash Tshs 2,500
30 Paid insurance by cash Tshs 500
Balance off the cash book and bring down the balance for May.
