This session we will have a look at the cash book in the bank reconciliation. In the cash book we account for all the bank transactions. And we will reconcile the cash with the bank statement to make sure that we accounted for all the bank transactions in our accounting records. First of all, we need to have a look to see what we already did. The whole we had a look at the sales journal. The sales journal is a summary of all your sales.

So we will account for sales and a monthly basis in the sales journal. We will transfer the transactions to the data's ledger to calculate what each data, we will transfer the titles to the general ledger and we add a look at the purchase journal. In the purchase journals a summary of our monthly purchases. We transferred the transactions to the creditors ledger TCM, much we owe the creditors and we transferred the titles to the general agent. Then we had a look at petty cash, the titles were transferred to the general ledger. And if we had data's receipts we transfer that to the data's ledger and credit as payments were transferred to uni created this ledger ledger.

Now today we will deal with the cash book and the bank reconciliation. Let's have a look at the theory. Cash book in the bank reconciliation system. Transactions receipts and payments relating to the bank accounted for in the cash book. So owner receipts are payments relating to the bank will be accounted for in the cash book. So we will have a receipt journal and we have a payment journal.

The receipts will be accounted for in the cash receipts journal and the payments in the cash book payment journal. In cash book is a detailed summary of all the bank transactions. So all our transactions per month will be accounted for in the cash book. And at the end of every month we will close it off and we will do a bank reconciliation and we will transfer the titles to the general ledger. every transaction that is accounted for in the cash book will be verified against the transaction on the bank statement to ensure that all transactions are counted for the cash book. There is the bank reconciliation In the cache for every transaction will reference back to a document with a number.

Checks will have a check number and receipts a receipt number receipts from data so that we can perform a cash free procedure with the entity entity, data's ledger. So receipts from GE data's will be accounted for in the data's ledger to reduce the balance so that we can see how much they have paid us and how much do I still times the credit is accounted for in the cash payment journal will be entered into the creator's ledger. So all those payments that we make towards creditors will be accounted for in the cash book. And we will transfer those transactions to the creditors ledger. And by doing that we'll be able to determine how much we credited. That was in the cash book receipt and payment journals will be accounted for in the general ledger.

We transfer The general interest to the general ledger cash book documents first of all is a bank deposit slip. So we began to deposit money, we will generate it positive. When we take payments no did with it check for we can do it in a tronic fund transfer and we will print a proof of payment. And then we will receive monthly statements from the bank and that is called bank statements. Let's walk through this cash book example. First of all the Caprica will be divided in the cash receipt journal.

And we will account for receipts in the procedure. And we have a cash book time in general. We will account for all the payments in the I'm in journal and then we have a bank statement for January. The first of all, we might have a receipt receipt one received one was issued for 10,000. So, a client walked into the business and the by 10,000 Rand on his account. So we issued him with receipt one then receipt he was issued c two c one and see 3200 again we need to match these increase with the bank statement to make sure that all the money was deposited.

So 10,000 10,000 normally we don't match values we match reference numbers on the bank statement they should be or one. So we will see all one or one image match the 10,000 then 710 deposit, seven deposit and then these are 5200 and it does not appear on the bank statement. The reason for that is we received the money on the 31st of January t x. And upon o'clock we closed the doors, and we might have a deposit slip. And we will early deposit the money on the first of February 2000 links because the bank closed at four o'clock, so we were to like to deposit the money on the 31st and we will take it to the bank on the first that a positive will only appear on the February bank statements. Then there was a 50,000 deposit on the bank statement that doesn't appear in a cash receipt journal.

Now we applied for the loan, the loan was granted and the money deposited into our bank account. So we need to account for my rescission also learn 50,000 then convert, then there is a deposit for 5000 so PCV my direct deposit into account 4000 so that's a nice PCB 4000 and we add up all our receipts 701 hundred. So we've matched all the receipts, and there's one receipt to see three, then doesn't appear on the bank statement, and then we need to get an account for all the payments. First of all, we might have to check 121 2000 then we should check to change to 91,000 issue check three Jake 114 and then it was check 44684 in and we need to match these entries with the bank statement. So check one, check one 2018 in this cheap 290 1000 and check three doesn't appear on the bank statement and check for doesn't appear on the bank statement.

So there are some outstanding items and 600,000 outstanding. But then these bank charges on the bank statement these entries that do not appear in our time in general, so we need to get an account for those entries. First of all bank charges 50 rained, put it in 50 rain. There's another Bank charge 15 and then charge 15 grand and they was an installment on the line for 1000 minutes so we signed a debit order at the bank and the bank will collect the monthly installment directly from our bank account. So we will not issue a check for that installment loan 5000 and we signed that debit order for the insurance. So the insurance premium went through insurance 1500 so we accounted for the 50 54,500 and we will add up all our payments 10398.

It's me looking at cash book receipt journal. That's all the receipts for January and those were all the payments January so our cash book receipts 7900 in cash book payments, hundred thousand 398. And if we subtract the payments from the receipts we will have a negative cash book balance negative cash book balances in overdraft and you will see that we have a negative 2949 and everything but our bank balance is negative 339 hundred so there is a difference and we need to reconcile the difference. Now the 10,000 appeared in the cash for procedural and on the bank statement similar to the seven similar day the 50 with a 50 and 4000 5000 and we reconciled our payments 3000 T cells 91,000 91 the sixth floor and 114 we learn the bank statement, the 50 with a 5050 with a 50 and 5,000% a 4001 501 500.

So, in our general ledger for the receipts, we received 7900. So the bank is an asset, yes, it became more plus and if an asset becomes more, we need to debit 709 hundred and our payments was one double 398. So the bank is an asset, the asset reduced and if an asset becomes less we need to create it. So we will create it with 100398 and if we offsetting David's against the credit We will have a credit of 29498. Now a negative acid or acid that is encrypted means it's actually in liability. We are the bank that money but we need to reconcile our accounts with the thanks.

Now the reconciliation. We had our receipts 7900 we had a payments, one double 0398 and we had a cash balance of 29498 in fiscal festival opening balance error. So we started the business on the first of January, and the bank balance was zero. They made receipts 709 hundred and we had payments, we subtracted diamonds from 0038 and we have a negative cash book balance. 2949 so the cash book balance is the balance of the bank account in our accounting records. And then we add the outstanding items, there was a deposit receipt fee.

And that deposit doesn't appear on the bank statements. So less outstanding deposit for 200 negative. Now the only way I can explain it, if there is a positive day, then we need to make it a negative ABN. And the same way the chicks that chicks didn't go through the bank and the check the mean guy through the bank, so we need to add them so we subtracted these a year we add 114 and six, four. So it's 700 plus one double 039929 Four nine minus five 200 plus 114 plus six at four and that is a negative of 339. And and that is the bank balance on the 31st of January.

So the bank balance 339 hundred bank balance 339 hundred. So now you can see we have a negative balance in our accounts for 29498. We had these reconciling items and we could balance back to the bank statement balance. And now we know that we have accounted for all the bank transactions. So we've accounted for all the January bank transactions and then the next month February and in February we will have a cash receipts journal and a cash book payment journal. First of all We need to go and check in we will see on the bank reconciliation for January there was a 5208 that's 10 114 and a 604.

So the first thing that you need to use anything and chickadees in outstanding items appear on the bank statements for February. The first 200 is day. So we marked it for 200. Wednesday and 114 is the macro on 140. And we can see that check for 4684 is not on the bank stipend. Men we have February transactions, we should receipt for 5000 typically issued receipt five for 6000 receipt for 6000 total receipts 11,000 And then our payments check five 7006 8008 and they were bank charges hundred grand and painful bank charges accounted for and in the last installment on the loan 4000 and we had data that will give us 201 hundred so we had receipts of 11,008 and we had payments of 2100.

So cash book receipts 11,000 cash, payments 2100. Now the balance from January with 29 for none That was the amount on the bank reconciliation the cash book balance Do you not phone on eight that was the balance at the end of February and we will go and account now for the receipts for February bank is an asset and we received the money with the positive the asset became more plus immediate David 11,000. And we made some payments 2100 asset became less if an asset reduces we need to create it, credit form 2100 and then we need to go and balance the account. That was 49 598 and we need to put a debit here of 38 498 And we transfer that debit to the credit side because we put it in here and a new cash book balance is 38598 and then have enough space here, but we will have a credit of 313859 so this will be 4958.

And that entry was the balancing figure and also the balancing figure to the opposite opposite side. So the credit side so we have a cash book balance of 38598. And then we need to do a bank reconciliation for February. Open balance is our cash book balance on the first of every one two X and that will be the closing balance on the bank reconciliation for January. So cash book balance 29498 so new 29498 our cash book receipts, the receipts 11,000 11,000 that was a positive and our payments 2100 negative 2100 and our new cash book balance negative 38598 that was negative 2949 A plus 11,000. This 2100 3859 and that corresponds with bank balance, you know I can't see 8198 and then we need to cancel the last 10 items deposits 5000 so if we add a day we need to subtract Minus 5000 and minus 6000.

That was the two items that did not appear on the bank statement, the two receipts, then we have our payments that do not appear on the bank statements. The first one is the 604. That was outstanding On the January reconciliation. And that didn't appear on the bank statement for February. So they will be subtracted. So yeah, we add six and four.

Then it was the 7030 thousand. And if we total all of this, you get to a balance of negative 33914. And that corresponds with the bank's type of balance. So you can see that deposit in that deposit didn't appear on the bank statements. That was the deposit from the previous one. In these payments, only the hundred and the 4000 appeared from the bank statement 500 that did not appear that the not appearing.

So that's still standing and then we have the item 684 from the previous month's bank reconciliation, and 33914 that corresponds to the bank balance. And the 38598 corresponds with the general ledger account. 3849 a credit so negative is always accredited. Let's look at the detail of the rescission This is exactly the same information as in the previous example. First of all, we'll have a cash receipt journal and have a date data description reference number title data this can receive then sundry so we're just going to summarize the January transactions festival where the receipt 110 thousand Rand for schastye can have by the director. So on the first Mr. X description is she's the seat 1000 read, we don't have a shade column.

So we put in in this salary column in thousand men then proceed to similar for money deposit from the petty cash. So I received three was issued on the 25th petty cash deposit or do similar read and we deposited the money in the bank but we have received it From the petty cash so sundry similar read, we received it from me but the cash and then received three receive three data as he made a payment of otter from his account. discount of 44 was allowed on the account. So data HSC evidence for two double four. But we said it's fine, you can only buy for 1200. And we will give you a discount of fully foreign.

So all these again on the 31st agency data or three, we received 4200 that's the money that we will deposit but we need to credit five to double for on his account. And we gave him a discount of 44 and you can see the discount is in negative 3040 there were four minus 44 equals For 200 so remember to put the discount in negative balance that I've learned so far 200 is 44, less 44. And then we receive the Learn 50,000. There it is, and there was a direct deposit of 5000. So we toggle the columns in the 900 Status column, this can and sundry. And we need to generate a general ledger journal so that we can account for this in the general ledger.

First of all, we'll have data's control. thing to double for data's come from data's is an asset, the assets we can list minus. If assets become less we need to create it 10244 share capital equity, the equity became more because we received the money 10,000 in the sundry columns 10,000 Plus, if as equity becomes more we need to create 10,000 then we add the loan nine is a liability liability became more because we received the money but now we owe the bank some money 50,000 in credit and we had the bank petty cash control remember transactions between the bank and the petty cash we put to the bank very cash control. Theory cache control similar very similar. Now control account is not the asset liability or equity you income or expense account. You just need to know if i debit the bank now the bank is an asset here plus we received the money so the bank became more David 7900 debit the bank, they don't need to gather credit the bank petty cash controller can eliminate the scapula, this candle out is an expense and the expense became more plus because we gave discounts and that's an expense.

And if expenses becomes more, we need to debit fully foreign. And we add up our debits 7094 and we add up our credits for four and this we will copy into the general ledger and then we add the cash book payment journal. First of all check one 2000 cash check for the petty cash. So on the first it was a gastic petty cash see c one 2008 is that petty cash column so We put in the salary column 2010 check to 91 tried to create a mid discount of 200 was received. So we 912 hundred the credit said it's fine if you buy 91,000 rain I will give you 200 rain discount. So 31st mid created at the check amount is 91,000 the creditor will give us this kind of tune rain so we will receive a debit of 91 200 on the account and we received the scan of tutoring now we will put the discount in it.

Negative 91 200 minus 200 equals the check amount and then take 31131 140 vi l on the 31st All creators easy win win for creditor when we fall and check for six I 40 credited. Tell me first tell creditors for 634 634 and then we add payments on the bank statement. First of all we add the bank charges the bank charges 3004 in the bank charges column 50 rain bank charges again on the second check 50 rain 50 rain bank charges column and then we add a payment on the loan loan 5000 and we put it in the salary column 5000. And then we had the insurance 1500 1500 insurance and the insurance column will total the columns and we will add up all these columns Once and we will make sure that it equals the 100398 and then we need to do the journal create this journal.

First of all create this control traitors is a liability when we try to create this level of liability became less minus liability becomes less we need to debit 9199 then there was bank charges bank charges and expense expenses became more expensive becomes more we need to David 100 and then they was insurance expense plus David's insurance 1500 and then there was the bank very cash control again, we make a payment the bank lends an asset Reduce net will, we can create it and if we create the we need to debit the second. So, petty cash 2000 we debit 2000 right and in these alone elements and we might have payment on land, so, the land became less land near minus, if the land reduces need to David for the red rain for that and then the was this can proceed this can proceed this income so income became more plus income becomes more we need to create it we need to create it with 200 and our bank balance reduced from 100318 Bank as an asset to this we need to create it on 038 enter the trades or Right.

And David's 100 on AI system isn't talent and we need to copy and paste this to the general ledger. So, I just might as somebody have the general agent, I just want to show you some of the accounts. The first one is this can proceed. So this can receive a credit so we copy and paste that into the discount received from the general ledger can be created. Then bank charges. bank charges and expense undertrained David copied and pasted in name and we had this Candela for the foreign coffee in price 44 in David.

So you need to go and copy the general ledger journal entity. General Ledger, sir Copy that into the database controller can get into the shape capital account, you will make sure that all your debits equal the credits. And then we need to transfer that data's receipts from the cash book procedural into the debtors ledger we received 4200 grand from HSE but we got this kind of fully foreign. So, we need to offset for to double full on these accounts and HSE as you see is a data that is an asset as it produced in became less if an asset becomes less we need to create it 31st of January cashbook 5244 and you can see is the RS five two double four. And now we made a payment of 40 double four so these balances zero and then we received 5000 men from PC v PC v data is an asset the asset reducing became less an asset becomes less we need to create it.

So this is the 5000 range entry into his account. And from the cash payment journal we need to transfer the creditors payments to the creditors ledger. First of all mid 91,000 that was the check amount but we received 200 credit so 912 hundred needs to come off the account mid mid is a liability. The liability reduced because we paid it. If a liability becomes listing we need to debit 91 200 you can see 31st of Jenny from the bank 91 two and then we buy why l so Ws a liability liability became less liability becomes less we need to debit 31st of January 2008 Bank 114 and then we buy t okay 684 to guys a liability liability reduced if a liability becomes this we need to debit refers to changes bank 684. In the previous session we had a look at the transactions between the cash book NT petty cash, so I just want to recap on it.

So we issued a check one a one to the value of 3000. So, we went to the bank we cashed the check and we took the money and we put into the petty cash. So in our cash book payment journal, we will have chick one a one for 3000. And in a petty cash receipts journal, we will issue a receipt Netherlands I received 800 and that will be for 3000. And often we have accounted for the payment in the cash payments journal and the receipt in the petty cash procedure No, we will transfer the entries to the general ledger. So, we will have from the cash payment journal 3008 and we will put it in the bank petty cash control account for every debit is created.

So, the we've created this will be a debit 3000 and then from the petty cash journal medication asset asset became more plus if an asset becomes more we need to debit 3000 and the other sort of injury will go to the production cash controller can so they we put in debits and here we need to put in it credits. debits are equal to credits, the balance on their account is zero. So bank reduced to 3008. And our petty cash increased with three sales, we remember that you can't put 3000 in the bank, and 3000 in the petty cash. And when you do the petty cash, you put 3000 in the petty cash, that's the one day and 3000 in the bank, then you've duplicated the entry, this will be a negative 6000. And that will be a positive 6000.

So you can't allocate that amount to the bank, you need to allocate it to the petty cash control account. Again, do the example in the manual and make sure that you can do the bank reconciliation and make sure that analogies the difference between a cash book balance and bank balance and when to plus and when to minus the outstanding items. In the next session, we will do the data journal the traitors to the general journal and I will show you how to account for land in the accounting records. See you in the next session.