USE OF CASHBOOK AND CONTROL ACCOUNTS

If there is sufficient information relating to cash payments and receipts, then a simple cashbook for both cash in hand and cash at bank can be prepared in confirmation of deposits and payments made from the bank statement.

The information can then be posted to the relevant accounts e.g. any income received to the relevant income accounts, expenses to relevant expense accounts and assets and liabilities to relevant accounts. Information relating to amounts owed to suppliers/creditors and amounts due from debtors can be posted in summary to the control accounts.

The preparation of the cashbook and control accounts will enable one to estimate any cash sales or credit sales and cash purchases or credit purchases.

Steps in Preparing the Final Accounts
1) Prepare a statement of affairs at the beginning of the period (a list of all assets and liabilities) to determine the beginning capital.
2) Open and post the balances and transactions to these 3 relevant accounts (i.e. the cashbook (for both cash in hand and bank), sales ledger control account and purchases ledger control account. Any other account can be opened where necessary.
3) Make adjustments for any accruals or prepayments.
4) Extract a list of the balances. (Trial balance).
5) Prepare the final accounts.

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