Transcripts
1. Introduction to Cash Books: Hi, everyone. Welcome to
Mastering Cash Books, a step by step guide
for beginners. If you're handling
cash transactions in business, finance, or personal accounting, this class will transform
the way you track, manage, and reconcile
cash flows. Whether you're a student, a business owner or someone just curious
about accounting, this class will give
you a clear, simple, and engaging introduction to
the language of cash books. It's open for everyone. I'm proud to say my courses have reached learners
all over the world, helping them gain
confidence in accounting. This class will do
the same for you. It's not just any
ordinary class, rather, it will be
your secret weapon. You'll be able to track
cash flows effortlessly, reduce errors, and keep finances in check like
a true professional. We'll cover the basics of
cash books, the format, advanced entries such as
discounts and contra entries, and a very interesting
class project at the end of this class where you'll be required to prepare
a cashbook yourself. Well, what are the benefits? You'll gain practical
accounting skills, learn how to record and manage cash transactions
accurately. It's perfect for beginners, and it can enhance
you accounting and bookkeeping knowledge for
your career advancements. And you could work through real life examples
and case study. I guarantee a hands
on learning approach. So what are you waiting for? Let's get started, and let's master cash books.
Thank you very much.
2. Overview of Cash Books: Basics, Structure and Format: Hello, my genius accountants. Welcome back to the next video. In this video, we would be discussing one of the
most sophisticated, most complex and most interesting
book of original entry, which is known as the case book. Now, cash books are used to record the flow
of cash and bank. We don't record anything
else over here. No credit items, credit sales, credit purchases, credit sale returns, credit
purchase returns. We only record the
flow of cash and bank. An transaction which
involves cash or bank, we record that in the cashbook. Now, let's have a look at what the cash book looks like, okay? So let's dig right into this. This is a three column cashbook, and this is what we would
cover in this course, because this is the
most complex one. So why is it known as a
three column cashbook? Because you can
see discount cash and bank on the left side, discount cash and bank
on the right side. So these are the
major three columns. Date and details, that's just
something straightforward. Discount cash and bank
are the three columns. Now, the entire left side over here is known
as the debit side. The entire right side is known
as the credit side, okay? I'm sure you guys know
what's debit or credit now. I don't have to
explain that again. You can review my
previous videos. The date column signifies the date the transaction
had occurred. The details column, it covers a brief description
of the transaction. It could be the name of the customer, name of the supplier. It could be the nature
of the transaction, sales, purchases, any
expenses you paid. We write the details over here. This is the discount
allowed column, any discounts offered to customers to encourage
them to pay earlier. This is the discount
received column. Any discounts we received
from our supplier in order to pay our
liability earlier. The cash column on the debit
side shows the cash inflows, and the cash column on the right side credit side
shows the cash outflows. The bank column on the debit
side shows the bank inflows, and the bank column on the credit side shows
the bank outflows. So this is how a cash book
looks like. All right? So let's dig right
into an example. In the next video, I prepared a comprehensive question
on the casebook. So I'll see you all
in the next video. I hope you understand
the cashbook. See
3. Comprehensive Activity: Welcome back.
Genius accountants. In this video, we are covering a very crucial and important
exercise on cash books. After this lesson, hopefully, you would have the best
understanding on this chapter. So let's dig right in. Before we even move on, I want you all to remember
a very important point. Debiide the debit side of the cashbook would
always signify inflows. And the credit side, the right side of the cashbook would always signify outflows. So if it's an inflow, just throw it on the debit side. If it's an outflow, you'll
throw it on the credit side. Okay? Right. Now, let's
begin the question. Balance is at one Janu
went in as follows. Cash 20,000, bank 35,000. I want you guys to
understand one thing. These balances are the
opening balances, right? And in accounting, the
technical term used, its quote balance brought down. Okay. It's called
balance brought down. The opening balance
means how much cash or how much money is in my bank at the start of the
accounting period. Before any transactions,
before any sales, before any inflows or outflows, at the start of the period, how much money do have
available with me, which came from the
previous period. So we call this balance
brought down. Why B? Because this B stands
for beginning, okay? Balance at the beginning
of the period. So I'll put that
on the debit side. It's possible to have a negative balance in
your bank account. We study bank overdraft,
if you remember. So if your balance is negative in the bank
account, what would we do? We would put that on
the credit side, okay? Only bank can have such
a balance, nothing else. Only bank, nothing else. So cash was 20,000
and bank was 35,000, but in this case, it's
a positive balance. Right. Second, cash
sales of 30,000, there's an inflow. Isn't it? So I'll put that on the debit
side with the name sales. There's one more confusion
that students have, and I'll put the 30,000
in the cash column. What's that confusion? Some
students make an error. They write cash over year. Remember, we don't ever write the same name
in the same account. If I wrote cash, cash,
cash, cash, cash, cash cash, how would I know
where this money came from? Like, over here, it
says cash 30,000. How do I know where
this money came from? I'll be confused, right?
But if I write sales, I'll know, Oh, okay,
this was a sale. That's from where
I got this 30,000. So we always write
the opposite names. Third question, sold a motor
vehicle for 25,000 by check. That's also an inflow. Money is coming in only focus on the flow of money,
cash and bank. Don't look at anything else. So when I sold a motor vehicle, I got money, so I'll debit this. I'll write motor vehicle. In the bank column, I'll
write 25,000. Right. Question number four, borrowed
loan for $15,000 by check. So it means the money came
in my bank account, okay? I got a check. It
came in my bank, so that's also an inflow. I'll write loan. In
the bank column, I would put 15,000. Okay. Next, question number five, following receivables
paid us by cash. Okay. Following receivables paid us by cash, 30,020 thousand. Okay? 30,020 thousand. However, these prices mentioned are the prices before discount. This discount was not applied. Okay? So we have to apply this
discount before anything. Right. So I'll write five January over year
because their inflows, Jamie paid us, and Jury paid us. If I ask you how
much money I got, I have to subtract
the 10% discount that I allowed to these
customers, okay? So 30,000 times 10%. If I do 30,000 times 10%, so my discount would
be 3,000. Okay? Let me open the calculator. So everything is here in front of you. You
don't get confused. 30,000 times 10% is 3,000. Just wipe off 10.
That's a discount. So I'll write that in
the discount column. Okay. Jewry, 20,000. So 20,000 times 10%, the discount we gave was 2000. Now how much money
I got in cash, we would subtract the discount. So Jamie 30,000 minus
the discount of 3,000. So there is $27,000 discount
in the cash column. And for Jewry, 20,000 -2,000, so I would write
18,000 over year. Okay. Right. Question number six is
pretty interesting. Trust me, following receivables paid us by check,
net of discount. I don't know the
discounted value. I know that these are the
net of discount values, meaning this is the
actual amount I got. Compare this with question
number five, what we just did. We calculated the
discount first, then we calculated
the net values by subtracting the original
amount from the discount. But in this case, I
know the net values. So I'll show you what to
do in such questions. I'll share a small formula
with you. David and Ben. So 9,000 of David
and 8,000 of Ben, these were the actual
amounts we received, okay? These were the actual
amounts we received. So I'll just put these
amounts in the bank column, 9,000 for David
and 8,000 for Ben. Now, how to calculate
the discount? How do I get the discount? These are already the
discounted values, so I have to first move
to the original value. Okay? Before discount, then I would calculate
the discount. So listen, I'm going to share a formula with
you a very important, very easy formula, which will
help you in such questions. What we have to do over
here is simply take $9,000 divided by 100% minus the discount,
which is 10%. So in other words, I will
do $9,000 divided by 90%. Then I will reach my
original list price. Okay? So if I open the
calculator in front of you all, I'll do 9000/90 percent,
which is $10,000. This is the original price. Okay? So if the net price is $9,000 or original price is 10,000, how much
is the discount? Subtract both values. So we'll subtract
10,000 from 9,000. It means $1,000 is the discount. You can cross check yourself. If I multiply 10,000 multiplied
by the discount of 10%, I will get 1,000 anyways, what I just got right now. So this is the
formula we'll use. For Ben, what are we
supposed to do for Ben? 8000/80 percent. Okay? So 8000/80 percent,
you'll get 10,000. So if 10,000 is the list price, 8,000 is a net price. Subtract both values,
you'll get your discount. Which is $2,000. Right? You can cross check yourself. What is 10,000 times 20%? It should be 2000. It means we calculated
the correct values. Okay. I hope you
understand this treatment. We will do this again. Okay, right. Question
number seven. Now, question number seven
is called the contra entry. Now, why is this
called a contra entry? It's called a contra
entry because this involves a transaction
on both sides, on the debit and on the
credit on both sides. So listen, what happened? I withdrew cash and
put it into the bank. So I took out money
from my cash. I took out money from my cash. I put it into the bank. So it's involving both sides cash and bank, cash and bank. Now, it's very simple. Let's focus on the inflow
and outflow, okay? Whenever you solve
a contra entry, you have to focus on the
inflow and outflow first, okay? So step number one. What is the inflow?
What is the outflow? I took out cash and
put it into the bank. It means my cash is decreasing, and my bank is
increasing, isn't it? So I'll write 10,000 in the bank column because
that's increasing, and I'll write 10,000 in the cash column on
the credit side because that is decreasing. Now we'll write the
opposite names. Okay? In the bank column, I'll write cash, and in the
cash column, I'll write bank. I just told you in the
beginning of this video, we do not write the same
name in the same account. Otherwise, we won't know
from where this money came. Okay? And let's put the date
of the transaction. I hope you understand
the contra entry. Right. Next, cash
purchases 20,000, so that's an outflow
straightaway. We'll just write purchases
in the cash column, 20,000. Purchased a motor
vehicle by check. That's also an outflow. Money is going out, so
I'll write motor vehicle. There's no trade discount. If there was a trade discount, we would subtract that. 15,000 in the bank column. Next paid the following
payables by cash. Okay? So this is
the list prices. Okay? So we would take
25% of all these values. That's how we would calculate
the value of discount. It's an outflow. We are
paying our payables, so this will go on
the credit column. Okay, so let's
write ten January. Rose, ten January happy and ten January Roberts. Okay. So how much money
did we pay 25 first, we'll subtract the discount. We paid 85%. No, sorry, 75% because 25%
was the discount we attained. So we paid 25% of these value. So 15,000 times
75% just directly. So this is the value we
paid rose 11 50 by cash. So I'll write 11 per
250 in the cash column. Okay. Sets in the cash column. Then for happy, it's 7,500. So 7,500 times 75%. So 5625. I'll write that over here. For Robert, it's 10,000,
10,000 times 75%. I'll write 7,500 over here. If I ask you what's the
value of discounts, then we'll just subtract these original list prices
with the net prices over here. So for Rose, it's going
to be 15,000 -11 50. That's 3750 Okay, for Happy, it's going to be 5625 -7,500, which is 18 75. Okay. For Robert, it's going
to be 10,000 -7,500, so that's going to
be 2,500, right? Okay, next. Yeah. Now again, back to the
net of discount question. Paid the following
payables by check, and these are the net values. Okay? For Zuko and Rooki, these are the net
values mentioned. Okay? So it's an outflow. I would put that over here. On the credit side,
I'll write Zuko, we paid a check of 17,000 in the bank column
and Rooki as well. We paid 15840. Okay, 15840. Now, how would we
calculate the discounts? I just told it to you
right now a moment ago. How would we do
it? Quickly, Son? Tell me, pose the video
and solve it yourself. Right. We would do 17000/80 5%. So you would arrive to
your original list price. Then we can just subtract both values, we'll
get the discount. So 17000/80 5%, 20,000. So 20,000 is the list price. 17,000 we paid. So 3,000 would be the
discount for Zuko. SAN goes for rookie. Let's calculate for rookie. So 158, 40/80 8%. 100% -12% is 88%, isn't it? So 15840/80 8%, you get 18,000. Okay? You'll get 18,000. So 18,000 is the list price. 15840 is the net price. So subtract this,
subtract 18,000 -15 840. So 2160 is the value of
discount that Rooki gave us. Okay. Next. Now they're easy paid
electricity by check. That's an outflow, isn't it? That's an outflow,
so we'll put that on the credit side, electricity. 10,000. Okay. Insurance by cash, 7,500. That's also an outflow. So that will go on
the credit side. In the cash column, 7,500. Next, paid rent by check. That's also an outflow. So that will go in the credit
side in the bank column, 5,500. Drawings. The owner withdrew cash and
bank for his personal use. So these are also outflows. They're going out of
the business, right? 16. So I'll write drawings
from the cash column, 10,000 and from the
bank column, 5,500. Okay, now we are done. Now what's left is to balance. Now, how do we balance
the case book? In the next videos, I have taught the entire
method how to balance ledges. That same method would
apply over here, but I'm just giving you a quick
technique how to balance. So step number one is
to total all sides, okay? That's the first step. The second step is figure
out which side is greater. Is that the debit side or the credit side?
Which side is greater. Then after you figure out the greater side,
the bigger side. You would write the big
side on both sides, write the bigger side
amount on both sides. Write that amount on both
sides, whatever is bigger. Then finally, figure
out the missing value. That missing value would
be your closing balance. The closing balance would
mean the cash and bank you have left at the end of the
period after old outflows, after old inflows,
after old outflows, the money that's left, that's called the balance carry
down or the closing balance. The C is for closing. Right. Now, it's pretty evident that the debit side
is greater, okay? So let's calculate the
total of the debit site. Which. No, it's not error. Let's do it ourselves. 20,000 plus 30,000 plus
27,000 plus 18,000. 95,000 is the total on
the debit side, okay? In the cash column. So let's write that on both
sides because that's greater. I told you we write the
bigger amount on both sides. Don't forget that. So let me highlight
this separately. That's the total. Now, let's calculate the cash column total
of the credit side. 10,000 plus 20,000
plus 11250 plus 5625 plus 7,500 plus
7,500 plus 10,000. 71875 is the total of the
credit side cash column. So see the steps I taught you. Number one, we totaled. Number two, I figured out that
the debit side is greater. Number three, I wrote that
amount on both sides. Now, what's the missing
value? -95,000. So, two, three, one, two, 523125 is the
balance carry down. It's always the last
day of the month. I'll write balance carry down. This is my closing balance. In other words, this is the
amount I have left with me. See, 95,000 cash
came in my business, and I spent 71875. So how much money I've left? 23125. This is the carry down. This is what balance
carry down means. The money we have at the end of the period in the
cashbook, okay? Now, let's do the same
thing for the bank column. Even over here, the depot side is greater. It's pretty evident. So 35,000 plus
25,000 plus 15,000, plus 9,000 plus 8,000
and plus 10,000. 102000, 102000 on both sides because that's the
greater amount. Let's highlight this separately. So there's no confusion. Okay. Right. Now, let's calculate the missing
value on the credit side. Plus 10,000 plus
5,500 and plus 5,500. 68840, and we got 102,000. So let's subtract 102,000. So this is the amount we have
left in our bank, 33160. This is the carry down. Okay. And we would bring this
down to the next period. So this is co balance
brought down. Okay. So this is how we
solve the case book. Now, remember all the
important terms I taught you, the important concepts
I taught you. You have to understand that
if the net value is given, how do you calculate
the discount? I showed you the
formula for that, what to do in a contra entry, I showed you the
method for that. So see you all in the next
video. Thank you very much.
4. How to deal with Contra Entries?: Hello, genius accountants.
In this video, we would be discussing another major treatment in the cashbook of contra entries. We also covered this in the activity we did in
the previous videos, but students had some problems. So hopefully after this video, you would understand this
concept very, very well. So now what you do?
Let me show you. Now, what's a contra entry? A contra entry is
when you will have two simultaneous effects on the debit side and the credit side as
well in the cashbook. Question number one, it says, withdrew $100 from the bank
and put it in the cash tel. Before we even go into question, there are some steps I want
you all to remember, okay? What are those steps? How to master the contra entry. So the steps are quite
simple. Let me show you. Step number one, you have to identify the increase
or decrease. What item is increasing and
what item is decreasing. That way, you'll be able to
debit or credit the item. Okay? After you do that,
put the amounts, apply the amounts on the
debit or credit side based on your understanding of what's
increasing or decreasing. Then the final step is to
write the opposite names. Like if the cash
column is debited, in the debit will write bank. If bank is credited, in the credit column
will write cash. Now, let's do the first
question based on the steps. Widrew 1,000 from the bank
and put in the cash still. Let's identify what's increasing and what's decreasing because
that's the first step. So withdrew from the bank. So the bank is decreasing, and the cash is
increasing. Okay. So it's very, very simple. Cash is increasing. So remember, debit
side is the increase, the inflow, and credit is
the outflow, the decrease. So I'll write $1,000 in the debit side in
the cash column because cash is increasing. And I would write 1,000 in the bank column because
bank is decreasing. And step number three says
write the opposite names. Here, bank is credited, so I would write cash. And here, cash is debited, so I would write bank. This is how we do
the contra entry. Question number two, deposited 500 into the bank
from the cash till. So in this case, the cash is decreasing and the
bank is increasing. Okay? It means I would write 500 in the bank column on the debit side because
that's an increase, and I would write 500 in the cash column on the credit side because
that's a decrease. Now step number three says
write the opposite names. So in cash, I would
write bank and in bank, I would write cash. All right? So this is how to do contra entries
in the cash books. See you all in the next
video. Thank you very much.
5. Treatment of Discounts in cash book - Secret Formula: Come back my genius accountants. In this video, we would be covering the treatment of
discounts in cash books. We covered this in
the previous lesson. We did a thorough and comprehensive activity
of cash books, but some students were
complaining to me that they were having issues
in this treatment. So let's cover it once more, so it will be better
for you understanding. Now, remember, the debit
column signifies inflows. The credit column, however,
signifies outflows. So if you look at
question number one, the following receivables
paid us by cash, so that's an inflow. We only focus on the
flow of cash and bank. This is an inflow. This means that we
would be writing Johnny on the debit side and jewelry as well
on the debit side. We have to do some
calculations here. Question one is pretty
straightforward. List price means the original
price before discount. So if we just
multiply it by 10%, both values, multiply it by 10%, we would arrive at the discount. So 20,000 times
10% is 2000 sorry, 30,000 times 10% is 3,000, as you can see, so I would
write 3,000 over a year. And for Jewry, 20,000 times 10%. Which is 2000, I would
write over here. Now, how will we arrive
at the net price? 30,000 is the list price. 3,000 is the discount, subtract both values, okay? Then we would arrive
at the net price. So 30,000 -3,000 is 27,000
then 20,000 -2,000 is 18,000. This was pretty simple
and straightforward. Question number two
requires a formula. The reason is, we know
the amounts we paid, the net amounts. We
know what we paid. Zuko, we paid Zuko 17,000. We paid Ruki 15,840. That's simple. So I
would write the names over here, Zuko 17,000. And Ruki 15840. But, guys, the problem lies how to arrive
at the discount? How will we calculate
the discount? Because these are the
net amounts already. They are after the
treatment of discounts. So I will help you
with a formula, a quick formula, which
would be very simple. The formula is in order to
arrive at the list price. Because if we know
the list price, then obviously we can
calculate the discount. So we'll take the net amount, the net price divided by
100% minus the discount. 10%. Whatever
discount it is ten, 15, 20, 100%, minus that. If we look at ZoCO it's going to be 17000/100 percent -15%. So 17000/80 5%. 20,000 is the list price. We arrived at the list price. Remarkably, we arrived
at the list price. So subtract both, subtract 17,000 from 20,000,
you get 3,000. So that's the discount. Okay. If you want to see what
we did is correct, the discount is 15%. So discount is always applied
on the list price, right? So if you multiply
20,000 with 15%, you should get 3,000. So let's see times 15%. That's 3,000, so we got it. Okay. Now, let's do
the same for Rookie. I want you to pause
the video and calculate the list price
for Rookie for me. So 15840 is the amount. Divided by 100 -12% is 88%. Let's see what we get. 18,000. Guys, 18,000
is our list price. So just subtract
15840 from 18,000, you would get your discount. 2160 is our discount
that we received, right? 2160. If you want to
verify what is correct, multiply 12% with 18,000, you should get 2160. There we go. We got 2160. So I hope you understand now how to calculate discounts
in the cashbook. Remember the formula
I ought you. See you in the next video.
Thank you very much.
Daanish Omarshah, Accounting & Finance expert
