This accounting problem is solved step by step below, with detailed explanations to help you understand the method and arrive at the correct answer.
ScanSolve AI Answer
Step 1: Set up the two-column cash book with opening balances. The cash book records all cash and bank transactions. The opening balances for Cash and Bank on 1 January 2026 are N\20,000 each. Cash Book for January 2026 \\ |l|l|l|r|r||l|l|l|r|r| Date & Particulars & Folio & Cash (N\) & Bank (N\) & Date & Particulars & Folio & Cash (N\) & Bank (N\) \\ Jan 1 & Balance b/d & & 20,000 & 20,000 & & & & & \\ Step 2: Record all receipts (debit side) and payments (credit side) for January 2026. Contra entries (transfers between cash and bank) are marked with 'C' in the folio column. Cash Book for January 2026 \\ |l|l|l|r|r||l|l|l|r|r| Date & Particulars & Folio & Cash (N\) & Bank (N\) & Date & Particulars & Folio & Cash (N\) & Bank (N\) \\ Jan 1 & Balance b/d & & 20,000 & 20,000 & Jan 4 & Land and Buildings & GL & & 105,000 \\ Jan 1 & Capital & GL & & 130,000 & Jan 5 & Purchases & GL & & 15,000 \\ Jan 6 & Bank (Contra) & C & 4,000 & & Jan 6 & Cash (Contra) & C & & 4,000 \\ Jan 8 & Sales & GL & & 10,000 & Jan 10 & Vehicles & GL & & 60,000 \\ Jan 16 & Rent Received & GL & & 900 & Jan 15 & Telecom & GL & & 5,000 \\ Jan 22 & Bank (Contra) & C & 2,000 & & Jan 18 & Water & GL & 800 & \\ Jan 31 & Cash (Contra) & C & & 2,000 & Jan 22 & Cash (Contra) & C & & 2,000 \\ & & & & & Jan 23 & Insurance & GL & & 900 \\ & & & & & Jan 24 & Salaries & GL & & 5,800 \\ & & & & & Jan 31 & Bank (Contra) & C & 2,000 & \\ Step 3: Calculate the totals for each column and determine the closing balances. • Cash Debit Total: N\20,000 + N\4,000 + N\2,000 = N\26,000 • Cash Credit Total: N\800 + N\2,000 = N\2,800 • Bank Debit Total: N\20,000 + N\130,000 + N\10,000 + N\900 + N\2,000 = N\162,900 • Bank Credit Total: N\105,000 + N\15,000 + N\4,000 + N\60,000 + N\5,000 + N\2,000 + N\900 + N\5,800 = N\197,700 Step 4: Close off the cash book by calculating the balance carried down (c/d) and brought down (b/d). • Cash Balance c/d: N\26,000 (Debit Total) - N\2,800 (Credit Total) = N\23,200 (Credit side to balance) • Bank Balance c/d: N\197,700 (Credit Total) - N\162,900 (Debit Total) = N\34,800 (Debit side to balance, indicating an overdraft) Cash Book for January 2026 \\ |l|l|l|r|r||l|l|l|r|r| Date & Particulars & Folio & Cash (N\) & Bank (N\) & Date & Particulars & Folio & Cash (N\) & Bank (N\) \\ Jan 1 & Balance b/d & & 20,000 & 20,000 & Jan 4 & Land and Buildings & GL & & 105,000 \\ Jan 1 & Capital & GL & & 130,000 & Jan 5 & Purchases & GL & & 15,000 \\ Jan 6 & Bank (Contra) & C & 4,000 & & Jan 6 & Cash (Contra) & C & & 4,000 \\ Jan 8 & Sales & GL & & 10,000 & Jan 10 & Vehicles & GL & & 60,000 \\ Jan 16 & Rent Received & GL & & 900 & Jan 15 & Telecom & GL & & 5,000 \\ Jan 22 & Bank (Contra) & C & 2,000 & & Jan 18 & Water & GL & 800 & \\ Jan 31 & Cash (Contra) & C & & 2,000 & Jan 22 & Cash (Contra) & C & & 2,000 \\ Jan 31 & Balance c/d & & & 34,800 & Jan 23 & Insurance & GL & & 900 \\ & & & & & Jan 24 & Salaries & GL & & 5,800 \\ & & & & & Jan 31 & Bank (Contra) & C & 2,000 & \\ & & & & & Jan 31 & Balance c/d & & 23,200 & \\ & & & 26,000 & 197,700 & & & & 26,000 & 197,700 \\ Feb 1 & Balance b/d & & 23,200 & & Feb 1 & Balance b/d & & & 34,800 \\ The final cash book for January 2026 is shown above. The closing balances are: Cash:* N\23,200 (Debit balance) Bank:* N\$34,800 (Credit balance / Overdraft) 3 done, 2 left today. You're making progress.