Question 5.4.3: Double entry for cash transactions In the cash book of a bus...
Double entry for cash transactions
In the cash book of a business, the following transactions have been recorded.
(a) A cash sale (ie a receipt) of $250
(b) Payment of a rent bill totalling $150
(c) Buying some goods for cash at $100
(d) Buying some shelves for cash at $200
How would these four transactions be posted to the ledger accounts and to which ledger accounts should they be posted? Don’t forget that each transaction will be posted twice, in accordance with the rule of double entry.
(a) The two sides of the transaction are:
(i) Cash is received (debit entry in the cash at bank account).
(ii) Sales increase by $250 (credit entry in the sales account).
(Note how the entry in the cash at bank account is cross-referenced to the sales account and vice-versa.
This enables a person looking at one of the accounts to trace where the other half of the double entry can be found.)
(b) The two sides of the transaction are:
(i) Cash is paid (credit entry in the cash at bank account).
(ii) Rent expense increases by $150 (debit entry in the rent account).
(c) The two sides of the transaction are:
(i) Cash is paid (credit entry in the cash at bank account).
(ii) Purchases increase by $100 (debit entry in the purchases account).
(d) The two sides of the transaction are:
(i) Cash is paid (credit entry in the cash at bank account).
(ii) Assets – in this case, shelves – increase by $200 (debit entry in shelves account).
|
CASH AT BANK ACCOUNT |
|
| $
Sales a/c 250 |
$
|
|
SALES ACCOUNT |
|
| $
|
$
Cash a/c 250 |
|
CASH AT BANK ACCOUNT |
|
| $
|
$
Rent a/c 150 |
|
RENT ACCOUNT |
|
| $
Cash at bank a/c 150 |
$
|
|
CASH AT BANK ACCOUNT |
|
| $
|
$
Purchases a/c 100 |
|
PURCHASES ACCOUNT |
|
| $
Cash at bank a/c 100 |
$
|
|
CASH AT BANK ACCOUNT |
|
| $
|
$
Shelves a/c 200 |
|
SHELVES (ASSET) ACCOUNT |
|
| $
Cash at bank a/c 200 |
$
|