When I come to reconcile the accounts at the end of the month, I can simply cross of the £200 in the Cash ledger against the £200 on the bank statement.
But what if I pay £200 for Stationery and another £200 for say "Advertising" (which has a seperate ledger), at the same time?
If I have the same supplier for both these items, and receive an invoice for the total sum of £400 - how shoud I record this in the Cash book?
Should it be 2 seperate entries? ie
CR - Cash £200 DR - Stationery £200 CR - Cash £200 DR - Advertising £200
If so, my Cash book will show 2 seperate credit entries of £200, whereas my bank statement will show one £400 debit - won't this cause problems when I reconcile the accounts, as the entries will not be the same?
I am presuming that this is a cash transaction and not a credit transaction (Buy now pay at a later date). What you have wrote is nearly correct, but the Cash should be one entry as £400 and not 2 x £200 if that is what you have paid:
DR - Advertising £200 DR - Stationery £200 CR - Cash £400
The double-entry has taken place and balances but resembles what has actually happened. If it is a credit supplier (creditor) that you buy the goods from now and pay in say 30 days the transaction will be:
DR - Advertising £200 DR - Stationery £200 CR - Supplier Account £400
When it comes to paying the supplier you:
DR - Supplier Account £400 CR - Bank/Cash (Cashbook) £400
Also, if VAT registered, don't forget to seperate the VAT element.
Thanks very much for your reply, which makes perfect sense. You are indeed correct, this is not a credit transaction.
My only concern was that I understood that the "double-entry" book-keeping system requires that there are two entries for every single transaction - so wherever there is a DR, there is also a corresponding CR somewhere else.
With your method, there would be two "DR"s but only one "CR", albeit the total would be the same. Is that however the accepted method? I might also have a little trouble with my accounting software, as everytime I enter a DR or CR, it demand to know where the corrsponding entry is!
My only concern was that I understood that the "double-entry" book-keeping system requires that there are two entries for every single transaction - so wherever there is a DR, there is also a corresponding CR somewhere else.
Hello Odin
You are correct in that the DR must correlate to a CR, but you can 'total' them together as I have mentioned. As long as your DR's equal the Cr's, this is fine. A good example of this is when using a manual system, an analysed Cashbook will show the 'split' of the transaction to the various nominal accounts.
As for your software, it will be asking for the other posting as, for example, if you purchased goods, it will want to know if the other entry is to be a cash payment (Cash A/C), card/cheque/BACS payment (Bank A/C) or a Purchase Ledger entry (Supplier A/C). A good way to understand this is to purchase the Business Accounts book by David Cox. I have done formal qualifications and have practical experience but I find that this book is good for reference and explaining. It may be a tool worth purchasing.
When I come to reconcile the accounts at the end of the month, I can simply cross of the £200 in the Cash ledger against the £200 on the bank statement.
But what if I pay £200 for Stationery and another £200 for say "Advertising" (which has a seperate ledger), at the same time?
If I have the same supplier for both these items, and receive an invoice for the total sum of £400 - how shoud I record this in the Cash book?
Should it be 2 seperate entries? ie
CR - Cash £200 DR - Stationery £200 CR - Cash £200 DR - Advertising £200
If so, my Cash book will show 2 seperate credit entries of £200, whereas my bank statement will show one £400 debit - won't this cause problems when I reconcile the accounts, as the entries will not be the same?
Thank you in advance.
To be pedantic they wouldn't be ledgers as this would be taking them as seperate books, they would be accounts. :)
To be pedantic they wouldn't be ledgers as this would be taking them as seperate books, they would be accounts. :)
He'll not be using seperate books though as he is using a software package, so I don't understand your point?
Like I say I was just being pedantic and no offense meant. Ledgers as described in the opening post are books and to have a cash ledger then a stationery ledger would mean they are posted in seperate ledgers (books) and I think its worth while knowing the difference between the two to avoid confusion as even in accounting software you will come across various ledgers and accounts ................. meh 'twill teach me to be a pedant
