Book Keeping Plan Notes of Lesson SS1 (Year 10) 2nd Term
SS1 2nd term Enotes. Senior Secondary School Book keeping Plan for Year 10. Double Entry, Double cash book, Petty cash book system.
BOOK KEEPING SCHEME OF WORK SS1 SECOND TERM
WEEK 1 REVISION
WEEK 2 & 3 PRINCIPLES AND PRACTICE OF DOUBLE ENTRY
WEEK 4-5 DOUBLE CASH BOOK
WEEK 6 CONTRA ENTRIES
WEEK 7 MID TERM TEST
WEEK 8-10 PETTY CASH BOOK SYSTEM
WEEK 2 & 3
PRINCIPLES AND PRACTICE OF DOUBLE ENTRY
DEFINITION OF DOUBLE ENTRY
Double entry book keeping is the system of keeping account, which take advantages of the two-fold aspect of every transaction, whereby one account that receives is debited and another account, which gives, is credited.
The principle originated with the Venetican merchants of the fifteenth century. The system is the method of recording transactions so that both parties i.e. the giver and the receiver are brought into record. Double entry system is the entry of debit and credit for each transaction in the ledger.
Hence the double entry rules, “debit the receiver, credit the giver”.
RULES OF DOUBLE ENTRY
The following simple rules of double entry should be fully understood and memorized.
a. For every credit entry in an account there must be a corresponding debit entry in another account.
b. For every debit entry in an account, there must be a corresponding credit entry in another account.
c. All transactions must be recorded in two accounts, one account is debited and another account credited.
ADVANTAGES OF DOUBLE ENTRY
i. Ensure control of the business: The day-to-day control of the business is made easier because the information in the account cover all aspects of its affairs.
ii. Ensure complete record: Double entry helps to keep a complete record of each transaction.
iii. Preparation of final accounts: It is easy to prepare the final accounts, which helps in assessing the present position of the business, and how it has changed.
iv. Helps to check arithmetical accuracy; It is a check on the arithmetical accuracy of the clerical works, because every debit has a corresponding credit.
FEATURES OF DOUBLE ENTRY SYSTEM
1. It has two aspects: The principle of double entry recognizes that there are two aspects for a transaction. There should be a giver and a receiver.
2. It applies the debit and credit principle: Double entry system is based on the principle which recognizes the fact that every transactions of an organization is recorded on a debit and credit bases.
3. There is equal effect: In this system, each transaction has two equal effects. The actual amount of an aspect of transaction is equal to the other.
4. It is systematic: The system of double entry is the most systematic and orderly system of book keeping.
IMPORTANCE OF DOUBLE ENTRY
1. It shows the financial position: It shows the financial position of the business. This is revealed by preparing the balance sheet.
2. It reveals the profit or loss: It shows the profit or loss through the preparation of the profit and loss account.
3. Useful for decision making: Provides the necessary information needed for decision making. The owners, creditors and others use the information for decision making.
DIFFERENCES BETWEEN SINGLE AND DOUBLE ENTRY
| Double entry | Single entry |
| 1. It shows complete records of transactions. | Incomplete record of transactions. |
| 2. It is based on the dual concept. | It is not based on dual concept |
| 3. It keeps both personal and impersonal accounts. | It maintains only personal accounts. |
| 4. There is preparation of trial balance. | Trial balance is not prepared. |
| 5. Arithmetic accuracy can be ascertained. | It cannot be ascertained. |
| 6. It shows the true profit or loss of the enterprise. | It does not show the true profit |
| 7. It is good for large organization. | Good for small organizations. |
APPLICATION OF THE PRINCIPLES OF DOUBLE ENTRY
1. Any transaction involve two accounts
a. Receiving account or Receiver
b. Giving account or Giver
2. One account will be debited and another credited
Summary of the principle:
CREDIT GIVERS (GIVING ACCOUNT)
DEBIT RECEIVERS (RECEIVING ACCOUNT)
ILLUSTRATION OF THE PRINCIPLE OF DOUBLE ENTRY
Jan 1 Mr.Ojo started business with #10,000 cash
Effect (i) Increase in capital: Capital account
(ii) Increase in asset: Cash account
Action (i) Capital account -Credit
(ii) Cash account – Debit
Jan 2 Paid N150 Cash for insurance
Effect (i) Increase in expenditure: Insurance account
(ii) Decrease in asset: Cash account
Action (i) Insurance account – Receiver -Debit
(ii) Cash account – Giver – Credit
Jan 3 Bought motor van #60 paying by cheque
Effect: (i) Increase in assets – Motor van account
(ii) Reduction in assets — Bank account
Action: (i) Mixer van account — Receiver – Debit
(ii) Ban account – Giver – Credit
Jan 4 The proprietor put a further #500 into the bank
Effect: Increase in capital — Capital account
Increase in asset – Bank account
Action: Capital account – Credit
Bank account – Debit
Jan 5 Cash sales N300
Effect: Increase in assets -Cash account
Increase in sales – Sales account
Action: Cash account – Debit – Receiver
Sales account — Credit — Giver
Jan 6 Cash drawings #50
Effect: Reduction in asset – Cash account
An item of expenditure — Drawings account
Action: Cash account — Giver — Credit
Drawings account — Receiver — Debit
Jan 7 Cash purchases #30
Effect: Reduction in asset — Cash account
Increase in purchases — Purchases account
Action: Cash account — Giver — Credit
Purchases account — Receiver — Debit.
Jan 9 Withdrew #150 cash from the bank for office use
Effect : Reduction in asset — Bank balance
Increase in asset – Cash balance
Action: Bank account — Giver — Credit
Cash account — Receiver — Debit
Jan 10 Received loan #1,000 cash from Olu
Effect: Increase in asset – Cash account
Increase in liability — loan account
Cash account — Receiver — Debit
Loan account — Giver — Credit
Jan I4 Put cash N600 into the bank
Effect: Increase in asset – Bank account
Reduction in asset — Cash account
Action: Cash account — Credit – Giver
Bank account – Debit – Receiver
Jan 15 Purchase goods #10 on credit from Ojo
Effect: Increase in liability— Ojo account
Increase in purchases — Purchase account
Action: Ojo account — Credit – Giver
Purchases account — Debit – Receiver
Jan 16 Sold goods #305 on credit to Ajayi
Effect: Increase in asset Ajayi account
Increase in sales -Sales account
Action: Ajayi account – Debit – Receiver
Sales account — Credit – Giver
Jan 17 Goods worth N20 were returned to us by Ayo
Effect: Ayo account
Returns inwards account
Action: Ayo account – Credit
Returns inwards account — Debit
Jan 18 Goods worth #30 were returned to a supplier – Ojo
Action: Ojo account – Debit
Returns outwards account – Credit
CLASSIFICATION OF ACCOUNTS
Classification of transactions of similar nature demand a lot of accuracy.
Accounts can be classified into:
1. Personal account
2. Impersonal account
1. PERSONAL ACCOUNT: These are accounts for the names of individuals, firms or business enterprises e.g. Segun account, Olagunju Nig. Ltd account, Debtors and Creditors account.
2. IMPERSONAL ACCOUNT: These are accounts for properties, item of expenditures and income. It can be divided into two namely:
a. Real Account: These are accounts for something we can see, Couch or move. They are accounts for assets e.g. Land and Building account, Machinery account etc.
b. Nominal Accounts: These are accounts for expenses incurred, income received, losses and gains Discounts received account, Discounts allowance account, insurance and Interest accounts.
Rules for debiting and crediting
1. The account which “receives” is debited with the value that comes into the account.
2. The account that “gives” is credited with the value that goes out of the account.
These rules can now be applied to the classes of account.
TABULAR REPRESENTATION
| CLASSES OF ACCOUNTS | DEBIT SIDE | CREDIT | |
| 1 | Cash account | Money received | Money paid |
| 2 | Personal account | Receiving | Giving |
| 3 | Real account | Asset bought | Asset sold |
| 4 | Nominal accounts | Expenses and losses | Profit, income and gains |
The students must commit the rules above to memory.
REVISION QUESTIONS
1a. Explain the term double entry system of book keeping State the principle of double entry
b. List and explain the classification of accounts.
3. Classify the following under the heading of Personal, Real and Nominal account and state on which side of the ledger you would expect to find the balances:
- Robot (supplier)
- Rates
- Insurance
- Bank overdraft
- Stock
- Plant
4. Explain the following classes of account
- Real
- Personal
- Nominal
4. Give two examples each g
5. Complete the following table, showing the accounts to be debited and those to be credited.
Account to be debited Account to be credited
Bought furniture by cheque
Received commission by cheque
Paid wages by cash
Cash sales
Cash purchases
Started business with money in bank
The owner took cash for himself
Sold goods on credit to Mr. Snake
Bought fixture on credit from Mr. Odutola
WEEK 4-5
DOUBLE CASH BOOK
INTRODUCTION
This is the book for recording receipts and payments of money in cash or cheque. The cash book performs the function of receiving and paying out money in form of cash and cheque. It fulfils the function of a ledger account and a subsidiary book. No credit transaction should be recorded in the cash book
TWO COLUMN CASH BOOK: DOUBLE COLUMN CASH BOOK
In this type of cash book, two separate accounts cash and bank, are combined for the sake of convenience. There will be separate columns for date, particulars, folio, cash and bank.
Cash column: Cash receipts and payments are recorded
Bank column: All payments made by cheque and money received and paid into the bank are recorded
TWO COLUMN CASH BOOK
The two column cash book is a combination of cash account and bank account in one book. It shows the total particulars of all the money received and paid by the firm (either cash or cheque). The double column account is formed by placing the cash and bank accounts on the debit side as well as the credit side. In preparing the cash book, the principle of double entry will be strictly followed.
USES OF CASH BOOK
- Balances of cash and bank can be obtained at a glance.
- Performs the function of a subsidiary book.
- It also performs the function of a ledger.
- The cashier can conveniently keep the account up to date without interfering with the use of ledger for other purpose.
NATURE OF THE CASH BOOK
- The cashbook is divided into Dr and Cr sides.
- Each side has columns for Date, Particulars, Folio, Cash and Bank
- Receipts of cash will be debited to cash column
- Payments of cash will be credited to cash column
- Receipts of cheque will be debited to the bank column
- Payments of cheque will be credited to bank column
Uses of folio column
1. It speeds up references to the other book where double entry has been completed.
2. It shows the name of the other book in abbreviated form and the number of the page.
Dr Cr
| Date | Particulars | Folio | Cash | Bank | Date | Particulars | Folio | Cash | Bank |
| Jan 1 | Balance b/f | X | X | Jan 2 | Purchases | PL | X | X | |
| Jan 2 | Capital | X | Jan 3 | Drawings | X | ||||
| Jan 4 | Sales | SL | X | Jan 5 | Wages | X | |||
| Jan 7 | Loan | X | Jan 6 | Insurance | X | ||||
| Jan 9 | Biodun | X | Jan 8 | Transport | X | ||||
| Jan 11 | Income | X | X | Jan 14 | Cash | C | X | ||
| Jan 14 | Bank | C | X | Jan 16 | Sundry exp. | X | |||
| Jan 30 | Cash | C | X | Jan 17 | Asset bought | X | |||
| Jan 30 | Bank | C | X | ||||||
| Balance c/d | X | X | |||||||
| XX | XX | XX | XX | ||||||
| Feb 1 | Balance b/d |
WEEK 6
CONTRA ENTRIES
This is the transfer of money from the cash till to bank or withdrawals of cash from bank. In such a situation, ‘the entries’ will affect both the cash and bank accounts. The effect will be analysed separately below.
(a) Cash paid into the Bank: When there is surplus of cash in hand, the firm can pay it into the bank. Money will leave the cash till and will be deposited in the bank.
Effect: Cash balance will decrease: Bank balance will increase.
Action: Credit Cash column
Debit Bank column
The double entry will be completed in the cash book. The letter “C” must be recorded in the folio column to show the transfers. This will be illustrated below.
Dr Bank book Cr
| Date | Particulars | Folio | Cash | Bank | Date | Particulars | Folio | Cash | Bank |
| Jan 1 | Cash | (C) | Jan 1 | Cash | (C) |
This will be represented with arrows to show how cash goes out from the cash into the bank.
Example: A cash receipt of #650 paid into the bank. It will appear in the cash book as follows.
Dr Bank book Cr
| Date | Particulars | Folio | Cash | Bank | Date | Particulars | Folio | Cash | Bank |
| Jan 1 | Cash | (C) | Jan 1 | Cash | (C) |
(b) Cash withdrawn from the bank
When there is shortage of cash or insufficient cash in hand, then the firm can withdraw from their bank account. A cheque will be drawn and cash received.
EFFECT: Bank balance will decrease
Cash balance will increase
ACTION: Credit Bank column
Debit Cash column
The double entry can now be completed in the cash book.
Dr Cash book Cr
| Date | Particulars | Folio | Cash | Bank | Date | Particulars | Folio | Cash | Bank |
| Bank | (C) | Cash | (C) |
Example: Withdrew N250 cash from the bank for business use.
Dr Cash book Cr
| Date | Particulars | Folio | Cash | Bank | Date | Particulars | Folio | Cash | Bank |
| Bank | (C) | Cash | (C) |
BANK OVERDRAFT
The bank account can be overdrawn. The customer can take more than what he has in the bank to meet urgent needs. This is referred to as granting of an overdraft to a customer. In such a situation, the bank account balance will be on the credit side and it is a liability in the balance sheet.
Example: Segun enterprises shows #180 on the credit of his bank account as an overdraft. This will be shown below.
Dr Cash book Cr
| Date | Particulars | Folio | Cash | Bank | Date | Particulars | Folio | Cash | Bank |
| Balance b/f |
Note: When the credit side (Payment) is greater than debit side (Receipts) then there is an overdraft. #1 80 recorded on the credit side above is an overdraft.
DISHONOURED CHEQUES
These are cheques received from the customers but were rejected by the bank as are result of wrong signature incorrect amount and insufficient funds in the account. When the cheque is received, the cash book is debited but when it is dishonoured the cash book will be credited immediately.
RULES FOR DEBITING AND CREDITING THE CASH BOOK
i. Cash receipts from debtors dr Cash column Cash book
Cheque receipts from debtors dr Bank column
cr Personal account} Ledger
ii. Cash sales dr Cash column Cash book
Sales (cheque) dr Bank column
cr Sales account} Ledger
iii. Income received (cash) dr Cash column Cash book
Income received dr Bank column
Cr Income received account} Ledger
iv. Cash receipts on sales of assets dr Cashcolumn
Cheque receipts on sales of assets dr Bank column Cash book
crassets account) Ledger
v. Cash payments to creditors dr Cash column Cash book
Cheque payments to creditors cr Bank column
cr creditor account) Ledger
vi. Cash purchases of goods cr Cash column Cash book
Cheque purchases of goods cr Bank column
dr Purchases account) Ledger
vii.Cash Purchase of Assets cr Cash column Cash book
Cheque purchases of Assets cr Bank column
dr Assets account) Ledger.
viii Cash paid for Expenses cr Cash column Cash book
Expenses paid with cheque cr Bank column
dr Expense account) Ledger
Dr Wages account Cr
| Date | Particulars | Folio | Cash | Bank | Date | Particulars | Folio | Cash | Bank |
| Jan 26 | cash | CB |
Dr Stationery account Cr
| Date | Particulars | Folio | Cash | Bank | Date | Particulars | Folio | Cash | Bank |
| Jan 27 | Cash | CB |
REVISION QUESTIONS
1a. A Mr Bello started business with N80,000 in 2/ 1/93 and paid it into the bank on4/ 1/93.
His transactions for the rest of the month were as follows:
5/1/93 Purchases by-cheque N27,300
6/1/93 Credit purchases N25,200;
Electricity paid by cheque #500, RentN700 by cheque
7/1/93 Drew cash for office use N1,200
Sales: By cheque N42,520
By Cash #480
By Credit N50,000
8/1/93 Paid creditors by cheque #15,100
9/1/93 Cash salesN17,115 cash wages paid #500
12/1/93 Received from customers cheques forN3 9,200
13/1/93 Paid into bank the sales made on 9/1/93: Stationery bought by cash #50
15/1/93 Drew cash for office use #200
16/1/93 Servicing and repairs by cash #120
Purchases: Cash #20,000
Credit #45,000
Cheque N5000
21/1/93 Sales: Cash #37,500
Cheques N17,000
22/1/93 Paid creditors #21900 by cheque
Cash sales N2,000 and immediately lodged into bank
24/1/93 Payments by cheque: Rents#1,500
WagesN2,000
28/1/93 Payments by cheque #3,600
31/1/93 Cash lodged in bank N200
You are require to prepare a two column cash bool for Yakubu for the month of January, 1993.
WEEK 7
MID TERM TEST
WEEK 8-10
PETTY CASH BOOK SYSTEM
IMPREST SYSTEM:
This is a system for recording petty cash transactions, rich are paid out of a cash float. The system is set up by giving a specified sum known as cash float to the cashier in order to cover petty expenses acting the period. The petty cashier will pay out money from the float for all authorized vouchers. At frequent intervals, he will be re-imbursed for the amount spent thus bringing it to the original amount.
PETTY CASH BOOK: This is the book of original or prime entry which is used for recording small disbursements or expenses e.g. postages, stationery, transport, etc. it is part of the double entry system. The source documents are invoices, receipts and vouchers.
Characteristics of an imprest system
- Selection of a petty cashier
- A fixed sum of cash float will be given to him
- Obtain approval and authorization before payment
- Ensure that all vouchers are supported by documentary evidence
- Re-imbursement for the balance to make up for the fixed amount.
Advantages of imprest system
1. Elimination of fraudulent practices
2. Ensures accountability for every expenditure since all are supported by documentary evidence.
3. The burden of the main cashier will be greatly reduced.
4. Extravagance will be revealed by keeping watch on the amount refund to the cashier.
5. Serves as training for young account clerks
6. Liabilities of the petty cashier can never exceed the imprest amount.
Procedures of petty cash book
1. Amount of float from the main cash book
Credit: Cash book
Debit: Petty cash book
2. Ruling of petty cash book
Credit side is wider than debit side
Credit side: Analysis columns: Debit side: Receipts side
3. Payments for expenses
Credit Petty cashbook with payment under related expenses (analysis column)
4. Total of analysis columns Analysis columns totalled and transferred to the debit of nominal ledgers
5. Re-imbursement of petty cash
The petty cashier will be re-imbursed at intervals to bring the amount back to the formal amount.
Layout of a petty cash book
| Receipts | F | Date | Details | V. No | Total | Postage | Cleaning | Transport expenses | Medical expenses | Ledger |
| # | # | # | # | # | # | # | ||||
| 700 | CB | Jul.1 | Bal b/d | |||||||
| Jul.2 | Cleaning | 15 | 15 | |||||||
| Jul.3 | Bola | 70 | 70 | |||||||
| Jul.5 | Postage | 30 | 30 | |||||||
| Jul.7 | Transport | 40 | ||||||||
| Jul.8 | Cleaning | 20 | 20 | |||||||
| Jul.9 | Medical exp | 55 | 55 | |||||||
| Jul.10 | Petrol | 15 | 15 | |||||||
| 245 | CB | 245 | 30 | 35 | 15 | 55 | 70 | |||
| Jul.31 | Cash Bal c/d | 700 | ||||||||
| 945 | 945 | |||||||||
| 700 | Aug 1 | Bal b/d |
Illustration: The following is a summary of the petty cash transactions of Kabiyesi Ltd for May 1999:
May 1 Received from cashier N1, 600 as petty cash floats
May 2 Petrol 70
May 3 Postages 90
May 4 Travelling 60
May 5 Postage 25
May 6 Petrol 110
May 8 Travelling 85
May 9 Cleaning 90
May 10 Stationery 45
May 12 Postage 65
May 14 Cleaning 165
May 15 Petrol 90
| Receipts | F | Date | Details | V. No | Total | Cleaning | Motor expenses | Postage | Stationery | Traveling | Ledger |
| # | # | # | # | # | # | # | |||||
| 1600 | CB | May1 | Bal b/d | ||||||||
| May 2 | Petrol | 70 | 1 | 70 | |||||||
| May 4 | Postage | 90 | 2 | 90 | |||||||
| May 5 | Traveling | 60 | 3 | 60 | |||||||
| May 6 | Postage | 25 | 4 | 25 | |||||||
| May8 | Petrol | 110 | 5 | 110 | |||||||
| May9 | Traveling | 85 | 6 | 85 | |||||||
| May10 | Cleaning | 90 | 7 | 90 | |||||||
| CB | May 12 | Stationery | 45 | 8 | 45 | ||||||
| May14 | Postage | 65 | 9 | 65 | |||||||
| May 15 | Cleaning | 165 | 10 | 165 | |||||||
| May 17 | Petrol | 90 | 11 | 90 | |||||||
| May 18 | Postage | 25 | 12 | 25 | |||||||
| May20 | Motor Exp | 215 | 13 | 215 | |||||||
| May22 | Cleaning | 105 | 14 | 105 | |||||||
| May24 | Traveling | 45 | 15 | 45 | |||||||
| May30 | Stationery | 95 | 16 | 95 | |||||||
| May31 | Cleaning | 65 | 17 | 65 | |||||||
| Kayode | 75 | 18 | 75 | ||||||||
| 1520 | 425 | 485 | 205 | 140 | 190 | 75 | |||||
| May 31 | Cash | ||||||||||
| 1600 | May 31 | Cash Bal c/d | 1600 | ||||||||
| 3120 | 3120 | ||||||||||
| 1600 | June 1 | Bal b/d |
Posting the analysis column into the ledgers account: The analysis column will be to talled and transferred the debit of nominal accounts.
REVISION QUESTIONS
1. Explain the following terms:
a. Imprest system
b. Cash float
2X. What are the advantages of petty cash book?
3X. Rule a Petty cash book with four analysis columns for postages and stationery, travelling expenses, carriage and office expenses and enter up the following transactions. The book is kept on the imprest system, the amount of the imprest being N1, 000.
January 4 Petty cash in hand N150
Received cash to make up the imprest
January 5 Bought stamps N150
January 6 Paid railway fares N19, bus fares N10, telegrams N30, Bought shorthand notes for office N50 1
January 7 Paid carriage on small parcels N27, railway fare N25 and envelopes N62
January 8 Paid for repairs -to typewriter N25, paid travelling expenses N128
January 9 Paid office cleaner N120
Balance the petty cash book on the 9th January 1998 and carry down the balance as at that date.
4X. Rule a petty cash book containing columns headed as follows:
Postage, fares, stationery, and telegrams. Enter the following transactions and balance the account
Jan.1 Received from cashier for petty cash N500
Jan.2 Bought stamps N50
Jan. 3 Paid bus fares N80: telegram N42
Jan. 4 Paid for telegram N30; stationery N7 5
Jan. Paid for postage stamps N25
Received from cashier cheque to make up the amount of the imprest N500
Jan. 9 Bought stamps N25
Jan. 10 Paid railway fares N15; telegrams N20
Jan.12 Paid for postage stamps N50; envelope N40
Jan. 13 Bus fares N50
Reference
ESSENTIAL BOOKING AND ACCOUNTS SENIOR SECONDARY SCHOOLS BY LONGE F. 1STEDITION (1999).
Simplified and Amplified Book keeping and Accounting for SSS, Revised and Enlarged with new topics by Femi Alonge 2012.