1. Ca$h Book II

2. What are we going to learn today?
Dishonoured cheques and treatment in Cash Book
Bank loan
Bank overdraft

3. A specimen cheque
Bobby Tan
Dollars Fifty only
50/=
A cheque is an order to the bank to pay some other person a fixed sum of money on demand.

4. A dishonoured cheque Reasons for cheques being dishonoured:
(a) signature not the same as the specimen given;
(b) insufficient funds;
(c) amount in words and in figures not the same;
(d) cheque post-dated
(e) signature missing;
(f) incomplete particulars, etc..

5. What happen when a cheque is dishonoured?
Reverse the entries recorded in the Cash Book.

6. Dishonoured cheque Record the entries into the Cash Book and ledger.
Example 1
March 1 Joe owed you from sales $500
3 Joe gave a cheque of $500
5 Joe’s cheque was dishonoured
by the bank.
Record the entries into the Cash Book
and ledger.

7. Journal Entry
1) Joe 500 Sales 500 3) Bank 500 Joe 500 5) Joe 500 Bank 500
Reversed

8. Cash Book Dr (IN) Cr (OUT) 2002 Joe 2002 Mar 3 Joe 500 Mar 5 Joe 500
Date
Bank
Cash
Discount
Particulars
Cash Book
Dr (IN)
Cr (OUT)
2002
Mar 3 Joe
2002
Mar 5 Joe
Joe
Mar Sales
Mar Bank
Mar Bank

9. Dishonoured cheque Record the entries into the Cash Book and ledgers.
Exercise
March 1 James owed you from sales $150
7 James gave a cheque of $120 in full
settlement of his account.
Discount allowed $30
9 Jame’s cheque was dishonoured
by the bank.
Record the entries into the Cash Book
and ledgers.

10. What happen when we need more cash?
Bank loan
Bank overdraft

11. Bank Loan • a certain sum of money borrowed from the bank
Accounting entries:
Dr Bank Account XX
Cr Bank Loan XX

12. Bank Loan Example: On May 1, we borrowed $10000 from the bank.
We put the money into our bank account.
Bank
Cash
Discount
Particulars
Date
Cash Book Dr Cr
2002
May 1 Bank loan

13. Can we draw out more cash than what we have in the bank account?

14. Yes, we can provided our application for overdraft has been approved by the bank.

15. So when does it have a credit balance?
Usually, bank account has a debit
balance.
So when does it have a credit balance?
When we draw on the bank
overdraft facility.

16. Example 1 – Bank Overdraft
2002
Jan 1
Christine’s Bank account in the cash book shows a debit balance of $500. She has an overdraft facility of $
Christine bought an office equipment for $4 000 and paid by cheque.
Jan 10
How much is Christine drawing on her overdraft facility?
Is the bank account showing a debit or credit balance?

17. The overdraft facility limit is not to be recorded in the Cash Book.$
2002
Bank
Cash
Discount
Particulars
Date
Cash Book Dr
Jan Bal b/d Cr
Jan 10 Office
Equipment
Bal c/d
Note:
Christine is drawing $3500 on her bank overdraft facility. Christine’s bank account has a credit balance.
She can continue to draw from her current account as long as the total credit amount does not exceed $
The overdraft facility limit is not to be recorded in the Cash Book.

18. What have I learnt today?
Dishonoured cheques and treatment in Cash Book
Bank loan
Bank overdraft