Corporate Fin Mgt NDLM.PDF

? The payments will be entered on the credit side

? The cash book will have discount column on both debit side as

well as on credit side.

o The discount is a nominal account. If discount is allowed when

receiving cash payment, it will be indicated as a loss. Cash

Account is an asset account and will appear on the debit side of

the cash book. The discount is a loss and being a nominal

account it will be debited.

o The opposite will be the transactions and postings if discount is

received at the time of making cash payment

Note: It is always better to avoid the cash transactions either in receipts or

payments. As far as possible all the transactions must undertaken through

banks to prevent fraud.

For small payments, it is advisable to maintain a Petty Cash Book instead of

burdening the main cash book.

5.1.3. Bank Column in Cash Book

? When payment is made by cheque, make entry on the credit side of the

bank column in the cash book.

? When cash paid to the Bank, cash Account shall be entered on credit side

and debited to the bank column.

? When cash is received, make entry only on the debit side of cash column.

? Each side of the cash book will have Ledger Folio Column Whenever, the

bank column and cash column are affected simultaneously, mark it as ‘C’

in L.F. Column. ‘C’ means ‘contra entry’ without necessitating further

ledger postings.

Points to note:

? When cash is drawn from Bank for office use, debit cash account and credit bank

account. Mark ‘C’ on both sides of the L.F. Column.

? Strike balance with reference to cash columns. The cash column always shows

the debit balance.

? Debit balance means cash receipts are more than cash payments. Post the debit

balance of cash to the credit side of cash column and balance it. (Similarly do it

for Bank Column separately)