I'm preparing for my basic bookkeeping exams with ICB and AAT.
As a study text I've been using the course textbooks provided by Kaplan, plus the Margaret Nicholson book "Accounting Skills."
In the Kaplan books, both cash and bank accounts are treated the same, so it doesn't matter if there is a cash or a cheque transaction as they are both recorded in the bank account.
However Margaret Nicholson separates the two and has different accounts for both cash and bank with cash transactions recorded in the cash account and transactions by cheque recorded in the bank account.
Which is correct and considered best practice?
Andrew
-- Edited by Scotchpie on Sunday 19th of September 2010 02:23:47 PM
The syllabus for the ICB Basic Bookkeeping exam refers to a two column cashbook (link: www.bookkeepers.org.uk/Syllabuses/Level I Certificate in Basic Bookkeeping). Which is quite simple and if it isn't shown in your textbooks, you can find examples by searching the internet.
A single combined bank(+cash) account is ok if no cash is held by the business, eg if cash received is paid straight into the bank, but this isn't usually the case. So it is necessary to have separate cash and bank accounts or a combined (two column) cashbook with separate cash and bank columns to account for transactions using pure cash as well as cheques etc via the bank.
This set up also caters for movement of funds between cash and bank, eg drawing cash out of the bank to top up a cash float or paying accumulated cash takings into the bank.
Later, you'll see that other columns are added to the cashbook but you don't need to know all that for basic level exams.
A very good book I can recommend is "Book-keeping and Accounts" 7th edition by Frank Wood and Sheila Robinson, will get you through ICB Level 2 aswell.
