Cash Books & The General Journal (Cambridge International IGCSE Accounting)

The cash & petty cash books

What are the cash book and the petty cash book?

• The cash book and petty cash book are books of prime entry

• They record all transactions which involve the exchange of cash

  • Petty cash is used for small valued transactions

• The book-keeper gets the information from:

  • Receipts
  • Cheques & cheque counterfoils
  • Paying-in slips
  • Bank statements
  • Petty cash vouchers

• The cash book and petty cash book are also part of the double entry system

  • This is different to the other books of prime entry

The general journal

What is the general journal?

• The general journal is also referred to as, simply, “the journal”

• The journal is used to record all transactions that do not go into the other books of prime entry, such as:

  • Opening balances when a business is first created
  • Introducing capital
  • Taking drawings
  • Purchasing a non-current asset
  • Selling a non-current asset
  • Correcting errors
  • Transferring balances to the statement of profit or loss

The layout of the general journal

How do I make a journal entry for a transaction?

• STEP 1 Enter the date

• STEP 2 Enter the name of the account(s) that need to be debited in the details column

  • It is conventional to enter the debit accounts before the credit accounts

• STEP 3 Enter the corresponding values in the debit column

• STEP 4 Enter the name of the account(s) that need to be credited in the details column

  • It is conventional to leave an indent for the credit entries

• STEP 5 Enter the corresponding values in the credit column

  • Make sure the total debit amount is equal to the total credit amount

• STEP 6 Write a narrative for the journal entry

  • This is a brief explanation of the transaction
  • This is especially useful for non-regular transactions and for correction of errors

Exam Hint Read the question carefully to see whether a narrative is required. If in doubt, you should include a narrative.

Worked Example On 1 February 2024, John starts an online tutoring business. He takes out a bank loan for $5000 and uses it to purchase a computer for $4000. He puts the remaining money in a business bank account along with $2000 of his own money.

Prepare the general journal entry to record the opening assets and liabilities at 1 February. A narrative is required.

Answer:

• Money in bank from loan

$5 000 - $4 000 = $1 000

• Total money in the bank

$1 000 + $2 000 = $3 000

• Capital is the difference between assets and liabilities

$4 000 + $3 000 - $5 000 = $2 000

Journal

Date	Details	Debit $**	Credit $
Final answer: 2024 Feb 1	Final answer: Computer	Final answer: 4 000
	Final answer: Bank	Final answer: 3 000
	Bank loan		Final answer: 5 000
	Capital	Final answer:**	Final answer: 2 000
		Final answer: 7 000	Final answer: 7 000
	Final answer: Opening balances for assets, liabilities and capital