1. Ca$h Book III

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

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

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 Example 1 March 1 Joe owed you $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. 2002 Mar 3 Joe 500 2002 Mar 5 Joe 500 Joe Mar 1 Bal b/d 500 Mar 3 Bank 500 Mar 5 Bank 500 Date Bank CashDiscount ParticularsDateBankCashDiscountParticulars Cash BookDr (IN) Cr (OUT)

8. Dishonoured cheque Example 2 March 1 James owed you $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.

9. 2002 Mar 7 James 30 120 AmountParticularsDateAmountParticularsDate DrCr 2002 $ James Mar 1 Bal b/d 150 2002 Mar 9 James 120 Mar 7 Bank 120 Discount 30 Mar 9 James 30 9 Bank 120 Discount 30 AmountParticularsDateAmountParticularsDate DrCr 2002 $ Discount allowed Date Bank CashDiscount ParticularsDateBankCashDiscountParticulars Cash Book Dr (IN) Cr (OUT)

10. In pairs, discuss and complete worksheet 3.

11. What happen when we need more cash? Bank loanBank overdraft

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

13. Bank Loan Example: On May 1, we borrowed $10000 from the bank. We put the money into our bank account. BankCashDiscountParticularsDateBankCashDiscountParticularsDate Cash BookDrCr 2002 May 1 Bank loan 10000

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

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

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

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

18. Cr $$$2002$$$ BankCashDiscountParticularsDateBankCashDiscountParticularsDate Cash BookDr Jan 1 Bal b/d 500 Jan 10 Office Equipment 4000 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 $10 000. The overdraft facility limit is not to be recorded in the Cash Book. 31 Bal c/d 3500

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