Ledgers, Bin Cards and Cash Books
8 minute read
What you will learn
- Describe the ledger, the bin card and the cash book
- Keep a stock ledger or bin card with receipts, issues and balances
- Keep a cash book with cash and bank columns
- Work out closing balances
- Explain how the ledger and bin card are checked against each other
- Explain how the cash book is checked against the bank statement
Key points
- The ledger and bin card record stock. The cash book records money.
- Stock balance = previous balance + received − issued.
- A cash book records receipts and payments, and the balance is receipts less payments.
- A cash book often has two columns, one for cash and one for the bank.
- Cash paid into the bank is entered as a payment in the cash column and a receipt in the bank column.
- The ledger, bin card and shelf count must agree.
- The cash book is checked against the bank statement each month.
The books and what they do
| Book | What it records | Where it is kept |
|---|---|---|
| Bin card (stock card) | Stock received, issued and balance, for one item | With the stock |
| Stock ledger | The same information for each item | In the store office, apart from the stock |
| Cash book | All money received and paid, with the balance | With the person responsible for the accounts |
Both the bin card and the ledger are used because one checks the other. If the same person keeps both, an error or a theft can be hidden.
The bin card and ledger
For each item, one line is written for each movement. The balance is worked out every time.
new balance = previous balance + received − issued
| Date | Reference | Received | Issued | Balance |
|---|---|---|---|---|
| 1 Oct | Opening | 300 | ||
| 4 Oct | RV 14 | 200 | 500 | |
| 9 Oct | IV 40 | 150 | 350 | |
| 15 Oct | IV 47 | 100 | 250 |
The closing balance is 250.
Checking
- Add up the received column, and the issued column.
- Opening + received − issued should equal the closing balance: 300 + 200 − 250 = 250.
- Compare the ledger, the bin card and the shelf count.
Example. The ledger and the bin card each show 450. The shelf count is 440.
- The records agree with each other but not with the stock: a deficiency of 10.
- Investigate it: a wrong count, an issue not recorded, or a loss.
The cash book
The cash book records every naira received and paid. A two-column cash book has a cash column and a bank column.
| Cash | Bank | |
|---|---|---|
| Opening balance | ₦20 000 | ₦100 000 |
| Receipts | ||
| Cash sales | ₦45 000 | |
| Cash paid into the bank | ₦40 000 | |
| Payments | ||
| Cash paid into the bank | ₦40 000 | |
| Expenses paid in cash | ₦5 000 | |
| Supplier paid by cheque | ₦30 000 | |
| Closing balance | ₦20 000 | ₦110 000 |
Working
Cash column
- Money in = 20 000 + 45 000 = ₦65 000
- Money out = 40 000 + 5 000 = ₦45 000
- Closing cash = 65 000 − 45 000 = ₦20 000
Bank column
- Money in = 100 000 + 40 000 = ₦140 000
- Money out = ₦30 000
- Closing bank = 140 000 − 30 000 = ₦110 000
Check. Total of both = 20 000 + 110 000 = ₦130 000. Opening total was 120 000, plus sales 45 000, less expenses 5 000 and the supplier payment 30 000 = ₦130 000. The money banked simply moved between columns.
The banking entry
When cash is banked, two entries are made:
- a payment in the cash column (the cash box is lower);
- a receipt in the bank column (the bank is higher).
Entering it once would make the totals wrong.
Checking the cash book against the bank statement
Each month, compare the bank column's balance with the bank statement. They may differ because of:
- cheques issued but not yet cashed;
- deposits not yet cleared;
- bank charges not yet in the cash book.
Example. The cash book bank balance is ₦110 000. A cheque for ₦10 000 has not yet been cashed.
- Bank statement should show 110 000 + 10 000 = ₦120 000.
If a difference cannot be explained, it must be reported and investigated.
Good practice
- Write up the books every day.
- Support every entry with a voucher or receipt.
- Never erase. Cross out, write the correction and initial it.
- Have the books checked by another person.
- Keep stock books and cash books separate, and keep them safe.
All amounts are made up for practice.
Exam focus
- Complete a bin card or ledger from a list of transactions.
- Complete a cash book with cash and bank columns.
- State the difference between a ledger and a bin card.
- Common mistake: recording cash banked as a payment only, and not as a receipt in the bank column.
Quick check
Test yourself before you move on. Pick an answer to see the explanation.
1.A bin card starts at 300. It receives 200 and issues 150, then 100. What is the closing balance?
2.Opening cash is ₦20 000. Cash sales are ₦45 000. ₦40 000 is banked, and ₦5 000 is paid for expenses in cash. What is the closing cash balance?
3.When cash is banked, in a two-column cash book it is entered as:
4.The ledger shows 450 units, the bin card shows 450, and the shelf has 440. What does this mean?
5.Why is the cash book compared with the bank statement?