CASH BOOK AND BANK RECONCILIATION STATEMENT

Cash book
The cash book is a subdivision of the book of original entry, recording transactions involving receipts or payments of cash. We can define cash book simply as the The book in which all cash transactions (either cash is received or paid) are primarily recorded according to dates is called cash book

Kinds of cask book

There are different kinds of cash book, such as: 1. Single column cash book (Simple cash book)-For recording cash transactions only. 2. Cash book with Cash and Bank column (Double column cash book)-For recording cash and bank transactions. 3. Cash book with Cash, bank and Discount column (Treble/Triple column cash book)-For recording cash and bank transaction involving loss or gain on account of discount. 4. Petty Cash Book- For recording petty expenses and receipts.

Contra entries
The term contra refers to the opposite side. Contra is an entry in a double entry account representing the reversal or cancellation of an entry on the other side. When both debit and credit aspects of a transaction are recorded in the same account but in different columns, each entry whether in the debit side or credit side shall be deemed to be the contra entry.

Bank Reconciliation Statement

If there is any discrepancy between the balance as per Cash Book and Pass Book, the depositor prepares a statement to explain the causes of discrepancies and to reconcile the two balances. This statement of explanation is called Bank Reconciliation Statement.

Petty cash book

The book in which small payments, which are not convenient to record in the main cask book, (like postage, traveling expenses, purchase of stationary etc.) are recorded is called Petty Cash Book.

System of Petty Cash Accounting

1. Open system: Under this system the petty cashier at first receives from the Chief Cashier a fixed sum of money for meeting petty expenses. As soon as the said amount is spent, the Chief cashier again pays the required sum to the petty cashier. 2. Fixed advance system Under this system the Petty Cashier receives from the Chief Cashier a fixed sum of money for a fixed period of time i.e. Rs. 1000 per month. The Chief Cashier will pay Rs. 1000 to the petty Cashier every month irrespective of this that whether Petty Cashier has spent the total sum or not. 3. Imprest system Under this system, the total petty expenses for a particular period are estimated and that amount is advanced by the Chief Cashier to the Petty Cashier. This amount is called Imprest Cash.

BILLS OF EXCHANGE
Definition
A bill of exchange is an instrument in writing, containing an unconditional order, signed by the maker, directing a certain person to pay on demand or at a fixed or determinable future time a certain sum of money only to, or to the order of, a certain person or to the bearer of the instrument.

Parties to a bill of exchange

There are three parties to a bill of exchange: Drawer The person who makes the bill is called the drawer. Drawee The person who is directed to pay is called the drawee. Payee The person who is directed to pay is called the drawee.

Types of bill of exchange

The following are the types of bill of exchange: 1. On the basis of period 2. On the basis of object 1. Period On the basis of period bills are two types: (a) Demand bills of exchange There is no fixed date for the payment of such bill. They become payable at any time, when they presented by the holder. (b) Term bills of exchange These bills are payable after specified period of time. The period after which these bills become due for payment is called tenor. 2. Object On the basis of purpose of writing the bills, the bills can be classified as: (a) Trade bill These bills are drawn and accepted against the sale and purchase of goods on credit. These are drawn by the seller (creditor) and accepted by the buyer (debtor). (b) Accommodation bill Such bills do not involve ant sale and purchase of goods; rather they are drawn without any consideration. The purpose is to help one party or both the parties financially.

Classification of bills of exchange

The bills of exchange can be divided into two classes given as under: 1. Inland bills These bills are drawn in a country upon persons living in the same country or made payable in the same country. Both drawer and acceptor reside of the same country. 2. Foreign bills These bills are drawn in the country and accepted and payable in another country, e.g. a bill drawn in Pakistan and accepted and payable in India.

Endorsement of bills of exchange

If the holder of the bill puts his signature on the back of the bill with a view to transfer the property contained in it (right to receive money from the acceptor), then he becomes Endorser, and the person to whom the bill is transferred will become Endorsee. This procedure by which a bill is transferred from one person to another person for the settlement of debts is called Endorsement

Dishonour of bills of exchange

A bill of exchange is said to be dishonoured when its acceptor refuses to pay the amount of the bill to the holder of the bill on its maturity.

Noting charges
When bill of exchange is dishonoured, the holder can get such fact noted on the bill by a notary public. The advantage of noting is that the evidence of dishonour is secured. This noting is done by recording the fact of dinhonour, the date of dishonour, the reasons of dishonour, if any. For doing all this, the notary public charges his fees which is called noting charges.