Theory question 106
Cash Book6. The following transactions were extracted from the books of Mercyland Trading Company as at 31st January 2005. All payments were made by cheque and all receipts were paid to the bank. The company maintains a float of N21,000.
January 2: Cash at Eaglet Bank N20,000
January 2: Petty cash in hand N1,400
January 3: Drew cheque for petty cash N19,600
January 5: Received from Anthony, cheque in settlement of his debt N32,600 less 10% discount.
January 6: Settled Tunde's account of N25,900 less 10% discount
January 7: Sold for cash 20 MTN cards at N750 per card
January 8: Transferred to current account from deposit account N70,000
January 10: Paid Olu N4,800
January 16: Paid cheque for motor repairs N8,000
January 17: Paid Ade N3,800
January 24: Paid Kofi N4,050
January 27: Paid Kwame N4,200
January 29: Payments from petty cash during the month were: Salaries and wages N8,000; Trade expenses N2,000; Sundry purchases N9,200
You are required to prepare: (a) Two-column cash book (showing Discounts and Bank columns only) for the month ended 31st January, 2005. (b) Petty cash book for the same period.
Show the model answer
(a) Cash book (discount and bank)
Dr: Jan 2 balance 20,000; Jan 5 Anthony 29,340 (discount allowed 3,260); Jan 7 sales 15,000 (20 × 750); Jan 8 deposit account 70,000; total bank 134,340; discount allowed 3,260.
Cr: Jan 3 petty cash 19,600; Jan 6 Tunde 23,310 (discount received 2,590); Jan 10 Olu 4,800; Jan 16 motor repairs 8,000; Jan 17 Ade 3,800; Jan 24 Kofi 4,050; Jan 27 Kwame 4,200; Jan 31 petty cash reimbursement 19,200; balance c/d 47,380; total 134,340; discount received 2,590.
(b) Petty cash book: receipts – Jan 2 balance 1,400; Jan 3 bank 19,600 (float 21,000). Payments (analysed) – salaries and wages 8,000; trade expenses 2,000; sundry purchases 9,200; total 19,200; balance 1,800. Jan 31 reimbursement from bank 19,200; balance c/d 21,000.
Discount columns are memoranda; the imprest is restored by a cheque equal to the month's petty payments.