Preparation of Bank Cash Book

Considerations for Preparing Bank Cash Book

Bank cash book is an important financial statement of government office. It should be prepared systematically by following the principles of double entry system of book-keeping. The effect of one financial transaction is made on debit side one account and credit side of another account. While preparing the bank cash book, the following points should be considered carefully:

• The bank cash book should be prepared after preparing the journal voucher.
• The transactions relating to cash receipts and payments should be posted in a cash account.
• The account debited in the journal voucher should be debited in the bank cash book and the accounts credited in the journal voucher should be credited in the bank cash book.
• The transactions relating to advance given should be posted in three accounts of the bank cash book, which are the bank account, budget expenditure account and advance account.
• The transactions relating to advance cleared should be posted twice in the budget expenditure account. The amount of real expenditure should be shown outside the bracket and the amount of advance cleared should be shown inside the bracket.
• The transactions relating to inter-head budget transfer, security deposit and other transactions are not posted in the bank cash book, as they do not affect the cash and bank balances.
• The item of the transactions does not fall under cash, bank, budget expenditure and advance accounts, is recorded in a miscellaneous account.
• The transactions affect two accounts in the bank cash book as per the rule of double entry.

Preparation of Bank Cash Book

Bank cash book is a ledger, which is prepared after the preparation of journal voucher. Journal voucher is the basis for preparing the bank cash book. The bank cash book is prepared by posting the transactions from the following journal vouchers:

• Posting from the journal voucher for budget expenditure transactions
• Posting from the journal voucher for advance transactions
• Posting from the journal voucher for miscellaneous transactions

Posting from the journal voucher for budget expenditure transactions

The journal voucher which is prepared to record the transactions relating to budget expenditure is called journal voucher for the budget expenditure. It records the payment for budget expenditures like salaries, allowance, office expenses, telephone charges etc. The -posting of budget expenditure n the bank cash book is made in the budget expenditure account and credit side of a bank account.

Posting from the journal voucher for advance transactions

Advance is an amount, which is given to official staff and other parties before receiving goods and services. It is given to perform a specific task. The advance transactions are posted in the bank cash book at the time of giving an advance and at the time of clearing advance.

• At the time of giving advance
  While posting advance given transaction in the bank cash book, three accounts, namely Nepal Rastra Bank a/c, budget expenditure a/c and advance a/c are affected. The posting for advance given is made in the bank cash book in budget expenditure a/c, debit side of advance a/c and credit side of Nepal Rastra Bank a/c.
• At the time of clearing advance
  The amount of advance, which is given to performing the specific task, should be cleared after its completion. The amount of expenditure may be equal to the advance, less than the advance or more than the advance amount.
  
  
• When the amount of expenditure is equal to the advance
  When the expenditure equals to the advance amount, the transaction affects the credit (cleared) side of the advance account and budget expenditure account. Under budget expenditure account, the amount of actual expenditure is shown outside the bracket and the amount of advance cleared is shown inside the bracket.
  
  
• When the amount of expenditure is less than the amount of advance given
  If the expenditure is made less than the amount of advance given, the surplus amount is returned to clear the advance. When the expenditure is less than the amount of advance, the transaction affects credit side of the advance account, budget expenditure account and debit side of a bank account. Under budget expenditure account, the amount of actual expenditure is shown outside the bracket and the amount of advance cleared is shown inside the bracket.
  
  
• When the amount of expenditure is more than advance given
  If the expenditure is more than the advance amount, the office should reimburse the excess amount of expenditure. When the expenditure is more than the amount of advance, the transaction affects credit side of the advance account, budget expenditure account and credit side of the bank account. Under budget expenditure account, the amount of actual expenditure is shown outside the bracket and the amount of advance cleared is shown inside the bracket.
  
  
• When the whole amount of advance is returned
  When the expenditure is not made and the whole advance amount of advance is returned, the transaction affects the credit (cleared) side of the advance account, budget expenditure account and debit side of the bank account.

Posting from the journal voucher for miscellaneous transactions

The transactions other than budget expenditure and advance are called miscellaneous transactions. These transactions do not affect on budget expenditure. The following are some of the miscellaneous transactions: area dedicated

Imprest/ Revolving fund release
Imprest/ Revolving fund release is the modern system of budget release newly introduced by the government.According to this system, at the beginning of each fiscal year, the office of the treasury and comptroller creates a fund to release the budget for all operating level offices. Each operating level offices receives an amount equal to the 1/6th of its last year's total budget expenditure at the beginning of each fiscal year as revolving or imprest fund release to spend on different heads of expenditure during the month of Shrawan. The transaction relating to imprest fund release affects Nepal Rastra Bank account and miscellaneous account. It is posted in the debit side of bank account and credit side of the miscellaneous account.

Budget release
Under present revised budget release system, each operating level office receives budget release order equals to the actual expenditure of the previous month. Hence, the budget release is based on the imprest system. For getting the budget release order, the operating level office should produce the necessary documents to District Treasury Control Office within the first week of each month. The following are the three conditions of budget release:

• When the amount of budget release order and bank order is equal
• When the amount of budget release order is less than the bank order
• When the amount of budget release order is more than the bank order

Distribution of salary and deductions made on it
Salary is distributed to the employees of government offices against the service rendered by them. The government determines the amount of salary of each level of employee. The salary is distributed after making a deduction of provident fund, income tax, provident fund loan and citizen investment trust. The deducted amount should be deposited in the concerned accounts. When the salary is distributed, it affects on the credit side of bank account, budget expenditure account and credit side of the miscellaneous account. Similarly, when the deductions are deposited in the concerned accounts, these affect on the credit side of bank account and debit side of the miscellaneous account in the bank cash book.

Petty cash fund
Petty cash fund is created in government offices for making the payment of a small amount of expenditures. Such small amount of expenditures like postage, tea, newspapers, bus fare etc. should be paid frequently by an office. It is impracticable and inconvenient to pay such small amount of expenditures through a bank. So, to pay for such expenses, the government office establishes a fund, which is known as petty cash fund. The amount of petty cash fund depends upon the nature and volume of petty transactions. When the petty cash fund is established, it is shown on the credit side of bank account and debit side of the miscellaneous account of the bank cash book. Similarly, when the petty cash fund is reimbursed, it affects on the credit side of bank account and budget expenditure account of the bank cash book.

Loan
Sometimes, the one government office may request for the loan another government office. In such conditions, both the loan providing as well as loan receiving government office have to maintain the record for loan taking and loan providing in the bank cash book. It affects the debit side of bank account and credit side of the miscellaneous account while receiving the amount of loan. Similarly, it affects the debit side of the miscellaneous account and credit side of the bank account while paying loan. It affects thedebit side of the miscellaneous account and credit side of the bank account while providing the loan and affects the debit side of the bank account and the credit side of the miscellaneous accunt when the amount of loan is received back.

Security deposit
Security deposit is concerned with the amount deposited by the contractor or supplier for supplying goods and services. Generally, 5% of the contract amount is required to be deposited as security deposit by the contractor. Such deposit will be refunded after the completion of the concerned job.