Prepare double column cash book from the following information for July 2017: 01 Cash In hand 7,500 01 Bank overdraft 3,500 03 Paid wages 200 05 Cash sales 7,000 10 Cash deposited into bank 4,000 15 Goods purchased and paid by cheque 2,000 20 Paid rent 500 25 Drew from bank for personal use 400 30 Salary paid 1,000
Double Column Cash Book
| Dr. | Cr. | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| Date | Receipts | L.F. | Cash ₹ | Bank ₹ | Date | Payments | L.F. | Cash ₹ | Bank ₹ |
| 2017 July 01 | Balance b/d | 7,500 | 2017 July 01 | Balance b/d | 3,500 | ||||
| 05 | Sales A/c | 7,000 | 03 | Wages A/c | 200 | ||||
| 10 | Bank A/c | 4,000 | 10 | Cash A/c | 4,000 | ||||
| 31 | Balance c/d | 1,900 | 15 | Purchases A/c | 2,000 | ||||
| 20 | Rent A/c | 500 | |||||||
| 25 | Drawings A/c | 400 | |||||||
| 30 | Salary A/c | 1,000 | |||||||
| 31 | Balance c/d | 8,800 | |||||||
| 14,500 | 5,900 | 14,500 | 5,900 | ||||||
| Aug 01 | Balance b/d | 8,800 | Aug 01 | Balance b/d | 1,900 |
Answer: Cash in hand ₹ 8,800; Bank overdraft ₹ 1,900
Explanation
This question tests the student's ability to prepare a double column cash book with both cash and bank columns. Key points to note: (1) Opening bank overdraft of ₹3,500 is entered on the credit side of bank column as it represents a negative balance/liability. (2) Cash deposit into bank on July 10 is a contra entry - debited in bank column and credited in cash column. (3) Purchase by cheque and drawings from bank are credited to bank column. (4) The final bank balance shows overdraft of ₹1,900 (credit side exceeds debit side), while cash balance is positive at ₹8,800.
Solution Steps
Step 1: Enter opening balances - Cash ₹7,500 on debit side, Bank overdraft ₹3,500 on credit side
Step 2: Record cash receipts - Cash sales ₹7,000 on debit side (cash column)
Step 3: Record contra entry on July 10 - Cash deposited into bank ₹4,000: Debit bank column, Credit cash column
Step 4: Record payments - Wages ₹200, Rent ₹500, Salary ₹1,000 in cash column (credit side)
Step 5: Record bank payments - Purchases ₹2,000, Drawings ₹400 in bank column (credit side)
Step 6: Balance the cash column: Total Debit (14,500) - Total Credit (5,700) = Balance c/d ₹8,800
Step 7: Balance the bank column: Total Credit (5,900) - Total Debit (4,000) = Overdraft Balance c/d ₹1,900