Cash Book

Day Book

We have explained that any transaction is first to be entered in Journal. Journal is a Day Book of chronological record of all transactions. It is the primary book of entry. However Journal Book does not reveal any accounting information. We can get any information about the accounts, only when we post the entries from Journal to Ledger, total up and compute the cumulative totals and net balance of the ledger account.
Cash is Current Asset. It is the most readily available form of Current Assets to meet the current obligation of business. Cash includes, paper currency, coins, cheque, bank drafts but excludes postage stamps, post-dated cheque, dishonoured cheque etc.
Business accounts are ultimately settled by paying and receiving money (i.e. Cash). Cash is the most frequently transacted account which gets involved in majority of our transactions. So, to run the business effectively, we need to know the balance of Cash after each transaction.
If we write the cash transactions also in Journal, we cannot know the position of Cash until we post the entries to Ledger account in ledger book and balance the Cash Ledger Account.

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Cash Book

Cash Book has evolved to serve the dual purpose of Journal, the primary book of entry, to record the transactions, and also the ledger of cash account, to get the balance instantly.
When we maintain Cash Book, we do not need to create a separate Cash Ledger Account in Ledger Book, as the Cash Book itself is the Cash Ledger Account. So, the volume of Ledger and the work of posting into ledger also drastically reduces.
Cash Book (or more appropriately called as Cash Bank Book) is sub division of Journal. So, it is a book of original entry and it records transactions related to receipts or payment by cash or cheque.
All cash transactions are first recorded in the Cash Book and then posted from Cash Book into Ledger Book
Cash Book performs the functions of Journal and Ledger at the same time.

  • Similarities with Journal :It is a primary book of all cash related entries. All cash transactions are recorded first in the Cash Book, in chronological order, with details in Narration, like a Journal Book.
  • Similarities with Ledger : Cash Book acts like a Ledger book of Cash Account, as it is balanced like a Ledger and the balance is carried in the Trial Balance statement. It has two sides (Dr. Side and Cr. Side), like a ledger. ‘To’ and ‘By’ are used while recording the transactions, like ledger. It is a part of ledger book (Cash A/c of ledger book). That is why, Cash Account is not opened in the ledger Book.

Accounting Entries in Cash / Bank Book

  • Opening Balance : Opening Balance appears in Debit (left) Side at the start.
  • Receipts & Payments : All Receipts are then entered at left or Debit side (as Cash  / Bank A/c is Debited when money is received).  All Payments are entered at Right or Credit side (as Cash / Bank A/c is Credited when money is paid).
  • Closing Balance : At the end, the closing balance appears at right side. The closing balance is computed as total of debit (left side), i.e sum of Opening Balance and all Receipts. From this total, the total Credit side (i.e total of all money payments)  is reduced to get the balance money in hand.

The closing balance is then written at the Credit side at the end of the period. The total of Debit side, i.e Opening Balance & total of all Receipts, and total of Credit side, i.e total of payments and closing balance, would be equal.
The Closing Balance is carried on as Opening Balance for next period / date. Normally, the balance is drawn at the end of each day, in cash / bank book.
In manual books, Normally a column for Voucher Number &  LF for posting of Ledger Folio is also provided where the respective Leger Folio is entered on posting to the Ledger Account .

Types of Cash Book

Cash Book may be maintained in several form, like Single, Double & Triple Columns. Sometimes Subsidiary Cash Book, like Petty Cash Book is also maintained

Single Column Cash Book

In single column cash / bank book, separate cash / bank books are maintained for Cash and each Bank Account. All receipts are recorded on the left hand or debit side, and all payments are entered on the Right hand or credit side.
Contra entries for Cash deposits to Bank and Cash withdrawals from Bank, will appear in both Cash & Bank Book, in opposite sides.
Cash deposit to Bank will be entered as Cash Withdrawal (right side) in Cash Book and Receipts in
Bank Book (left side). Similarly, Cash withdrawal from Bank will be entered as Bank Withdrawal (right side) in Bank Book and Receipts in Cash Book (left side).

Cash Book (Single Column) for Dec 2021

Dec.1To Balance b/d  5,000Dec.3By Purchases A/c. (Goods purchased)  1,500
Dec.7To Capital A/c. (Fresh capital introduced)  1,000Dec.9By Furniture A/c. (Furniture brought)  900
Dec.11To Rent A/c. (Rent received)  450Dec.10By Drawings A/c. (Spent for private use)  800
Dec.15To Bank A/c. (Cash withdrawn )  500Dec.25By Creditors A/c Paid to creditors).  1,100
Dec.21To Sales A/c. (Goods sold)  2,000Dec.31By Salary A/c. (Salary paid )  650
     Dec.31By Balance c/d.  4,000
2016   8,950    8,950
Jan.1To Balance b/d  4,000     

Double Column Cash Book

When there are bank transactions beside cash transactions, Double Column Cash Book is normally used, in which one additional column i.e. Bank column is also included. In Double Column Cash Book, both cash and bank transactions are recorded and so both balances can be obtained simultaneously.
Contra Entries : Contra entries for Cash deposits to Bank and Cash withdrawals from Bank, will appear in both Cash & Bank columns, in opposite sides.
Cash deposit to Bank will be entered as Cash Withdrawal (right side) in Cash column and Receipts in Bank Book (left side). Similarly, Cash withdrawal from Bank will be entered as Bank Withdrawal (right side) in Bank column and Receipts in Cash column (left side).

Cash Book (Double Column) for Dec 2021

Date 2021ParticularsBank DrCash DrDate 2021ParticularsBank CrCash Cr
Dec.1To Balance b/d3,0005,000Dec.3By Purchases A/c. (Goods purchased )1,500 
Dec.7To Capital A/c. (Fresh capital introduced)1,000 Dec.9By Furniture A/c. (Furniture brought) 900
Dec.11To Rent A/c. (Rent received in Cash) 450Dec.10By Drawings A/c. (Spent for private use) 800
Dec.21To Sales A/c. (Goods sold for cash) 2,000Dec.31By Salary A/c. (Salary paid in cash) 650
Dec 31To Bank (Cash withdrawn from Bank) 500Dec 31By Cash A/c (Cash withdrawn from Bank)500 
  4,0007,950  2,0002,350
    2022 Jan.1By Balance c/d.2,0004,600

Triple Column Cash Book

In this type of Cash Book, additional column for Discount Received & Discount Allowed incorporated. The total of Discount columns is posted in the Ledger.
Now-a-days, Triple Column Cash is book is normally not used. It is of academic interest only.

Petty Cash Book

In almost every business concern, a number of small payments e.g., conveyance, postage and telegram, taxi fare, cartage, printing, stationery, general expenses etc. are made daily. If such payments are numerous, the cashier will be overburdened and the cash book be filled up with numerous regular small transaction.
To overcome this difficulty, the organisation engages a “Petty Cashier” who is entrusted with the task of making small payments under different heads of expenses and maintains a separate book called “Petty Cash Book.” Petty Cash Book is a subsidiary Cash Book. It is like an annexure of main cash book, and forms a part of the main cash book.
The ruling of the Petty Cash Book provides separate columns for each mostly transacted common Ledger Account. The columns are totalled periodically and the periodical total figures are posted to the respective accounts in the Ledger Book.

Systems of Petty Cash

  • Normal system of petty cash: The Petty Cashier receives a lump sum amount of Cash and when the whole amount is spent he submits the account to the head Cashier. He receives fresh amount from main cahier to meet expenses for next period.
  • Imprest system of petty cash: A certain fixed amount is given to the Petty Cashier for a specified period. Petty Cashier submits the account of the sum spent with supporting vouchers. The head cashier reimburses the sum spent only. So, the original balance in petty cash account  is again restored. Imprest system provides better control.

Advantages of Petty Cash system

  • It reduces the burden of the head cashier and saves his valuable time. There is minimum chance of defalcation of Cash
  • The entries of the Petty Cash book are frequently checked by the cashier and hence errors, if committed, are immediately rectified. The Petty Cash accounts are always kept-up-to-date.
  • Individual posting of each small amount to ledger is eliminated. The total amount of each head is posted as one entry.

Balancing of Petty Cash Book

At the end of the period (Day or Month), all the A/c head columns are totaled and Balanced. The petty cash balance is obtained by deducting the payment column total on the credit side from the receipt column total on the debit side. This is written in the credit column, balanced off and brought down in the Debit column for the next period.

Petty Cash Book

Cash RecdDateParticularsCash PaidPost TelgStati oneryOffice  ExpGen Exp
30.00Apr1To Balance b/d     
50.00Apr1To Cash received    
 Apr 2By Postage stamp9.759.75   
 Apr 3By delivery charges15.50   15.50
 Apr 5By Stationery10.00 10.00  
 Apr 8By Office Cleaning12.00  12.00 
40.00Apr12To Cash Received    
 Apr18By Telegrams10.5010.50   
 Apr22By Stationery5.00 5.00  
 Apr25By Tiffin Expenses10.00   10.00
  By Balance c/d47.25    
120.00  120.00    
47.25Mar.1To Balance b/d     

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