CIMA BA3 Syllabus B. RECORDING ACCOUNTING TRANSACTIONS - Books of prime entry - Notes 3 / 35
Cash Book
The cash book records receipts and payments into and out of the business bank account.
These would include receipts and payments made by bank transfer, standing order, direct debit and bank interest and charges, directly by the bank.
A discount column in the cash book can be used to indicate cash discount that has been given or received.
Sales Day Book
The sales day book lists all sales made on credit.
It is used to keep a list of all invoices sent out to customers each day.
Therefore, the source document for the sales day book is an invoice.
Sales Returns Day Book
When customers return goods for some reason, a credit note is raised.
All credit notes are recorded in the sales returns day book (therefore, the source document for the sales returns day book is a credit note being given to the customer).
Purchase Day Book
The purchase day book lists all purchases made on credit, i.e. a list of all invoices it receives, (therefore the source document for the purchase day book is an invoice).
Purchase Returns Day Book
The purchase returns day book records credit notes received in respect of goods which the business sends back to its suppliers, therefore the source document for the purchase day returns day book is a credit note being received by the supplier.
Petty Cash Book
Most businesses keep a small amount of cash on the premises to make occasional small payments in cash, e.g. staff refreshments, postage stamps, to pay the office cleaner, taxi fares, etc.
This is often called the cash float or petty cash account.
Therefore, the petty cash book is a cash book for small payments.
Very often these businesses use the imprest system.
Under the imprest system, the petty cash is kept at an agreed sum, so that each topping up is equal to the amount paid out in the period.
Example
The amount of money in petty cash is kept at an agreed sum of $250.
Expense items are recorded on vouchers as they occur and the total voucher payments for the period were $55.
Therefore:
| $ | |
| cash still held in petty cash (250 - 55) | 195 |
| plus voucher payments (25+5+10+15) | 55 |
| ---- | |
| must equal the agreed sum or float | 250 |
| === |
The cash payment required from the bank account into petty cash is equal to $55, i.e. total of the voucher payments since the previous top-up.
Keeping cash (even in small amounts) on the premises is a security risk.
Therefore a petty cash system is usually subject to strict controls.
1. Payment is only made in respect of authorised claims.
2. All claims are supported by evidence.