FA – Nov 2014 – L1 – SB – Q3 – Recording Financial Transactions

Stating the differences between cash book and petty cash book, preparing a two-column cash book, and petty cash book.

Question

a. State FIVE differences between the Cash Book and the Petty Cash Book. (5 Marks)

b. The following transactions were extracted from the books of Mercy Trading Company at 31 January 2014. All payments were made by cheques and all receipts were paid into the bank. The company maintains a float of N21,000,000.

Date	Transaction Details	N’000
Jan 2	Cash at Eagles Bank	20,000
Jan 2	Petty cash in hand	1,400
Jan 3	Cheque issued for petty cash	19,600
Jan 5	Received from Fidelis, cheque in settlement of his account receivable of N32,600,000 less 10% discount
Jan 6	Settled Tunde’s account payable of N25,900,000 less 10% discount
Jan 7	Sold for cash 20 recharge cards at N750 per card
Jan 8	Transferred to current account from deposit account	70,000
Jan 10	Paid Lawal	4,800
Jan 16	Paid cheque for motor repairs	8,000
Jan 17	Paid Emeka	3,800
Jan 24	Paid Yaro	4,050
Jan 27	Paid Mazu	4,200
Jan 29	Payments from petty cash during the month were the following: Stationery N8,000; Trade expenses N2,000; Sundry purchases N9,200

Required:
i. Prepare a two-column cash book (showing discounts and bank columns only) for the month ended 31 January 2014. (7 Marks)
ii. Prepare a petty cash book for the same period.

(8 Marks)

(Total 20 Marks)

Answer

a. Five Differences between the Cash Book and the Petty Cash Book:

Nature of Transactions:
- The cash book records all cash and bank transactions.
- The petty cash book records small, day-to-day expenses.
Monetary Limits:
- The cash book handles transactions of large monetary value.
- The petty cash book deals with small, routine payments.
Columns:
- The cash book has bank and cash columns, sometimes a discount column.
- The petty cash book typically has columns for analysis of petty expenses.
Purpose:
- The cash book records both receipts and payments.
- The petty cash book records only small payments.
Replenishment:
- The cash book is replenished daily or as needed.
- The petty cash book is replenished when the float is exhausted or runs low.

b. i. Two-column Cash Book for the Month Ended 31 January 2014:

Date	Particulars	Discount Allowed (N’000)	Bank (N’000)	Date	Particulars	Discount Received (N’000)	Bank (N’000)
Jan 2	Balance b/d		20,000
Jan 3	Cheque for petty cash		19,600
Jan 5	Fidelis	3,260	29,340	Jan 6	Tunde	2,590	23,310
Jan 7	Cash sales (recharge)		15	Jan 10	Lawal		4,800
Jan 8	Transfer from deposit		70,000	Jan 16	Motor repairs		8,000
				Jan 17	Emeka		3,800
				Jan 24	Yaro		4,050
				Jan 27	Mazu		4,200
	Total	3,260	139,955		Total	2,590	48,160

b. ii. Petty Cash Book for January 2014:

Date	Details	Total (N’000)	Analysis of Payments (N’000)
			Stationery
Jan 2	Balance b/d	1,400
Jan 3	Cash received	19,600
Jan 29	Stationery	8,000	8,000
Jan 29	Trade expenses	2,000
Jan 29	Sundry purch.	9,200
	Total	19,600	8,000
	Balance c/d	1,800

Level: Level 1

Uploader: Dotse