Summary of Contents
- Cash Book records the cash transactions
- All receipts and payments are recorded in the cash book to minimizes the risk of the cash misappropriation and to monitor the overall movements of the cash
- Payments and receipts incurred via Cheque, Cash, Bank transfer, or online transfer are recorded in the cash book
- Cash book also considered as a Ledger
- There are three types of Cash bok, such as – Single Colum Cash Book, Double Column Cash book and Treble Column Cashbook.
- Discount Allowed and Discount received also include in the cash book but for this discount, no need to maintain separate ledger account.
- Discount allowed to be adjusted with the Receivable Account,i.e to be deducted from the customer account and sales Account
- Discount received to be adjusted with the Trade Payable Account i.e to be deducted from creditors and purchase account
What is Cash Book?
Cash book is the books of original entry which records the cash receipts and cash payments incurred during a particular period. All receipts and payments whether is received through Cheque, Cash, Bank Transfer, Postal order, Bank overdraft are recorded in the cash book.
Though cash book is considering as an original book of entry, it is also considered as an integral part of the ledger. Cash book is the book which serves the purposes of both journal and ledger. The details of every transaction are described in the cash book. Point to be noted that the balance of the cash balance always be a debit balance because a person can not pay more than he had.
As cash book is another kind of ledger, it has double entry in the cash book. In order to complete recording of other aspect of a cash transaction, only one sided posting is required to be made from the cash book. Payments are recorded in credit side and receipts are recorded in the debit side.
The folio of cash book are written in the ledger and the folio of ledger are mentioned in the cash book for cross reference.
Types of Cash Book
Normally three types of cash book is used in practical field, such as:
- Single Column Cash Book – records only cash transactions in cash column
- Double Column Cash Book – records both “cash and cheque” transactions in cash and bank column
- Treble Column Cash Book – records cash, Bank and discount in cash, bank and discount column.
Single Cloumn Cash Book
In a single column cash book, only cash transactions i.e. cash receipts and cash payments are recorded. Cash received from the several sources are recorded in the Debit side of the cash book and all payments are recorded in the credit side the book. The difference between the received side (Opening balance and received during the period) and cash payments equal ending cash balance of that period.
Example of single column cash book are as follows:
Enter the following transactions in the cash book of Square Limited.
Year -12:
August:
1-Aug : Opening Cash blance of Cash book is $ 1,780
4-Aug: Electricity Bill paid $ 600
5-Aug: Rent received from Mr. X $ 450
8-Aug: Received from Customers $ 1,840
10-Aug: Furniture Purchase $ 1,800
13-Aug: Raw Materials Purchase $ 1,200
14-Aug: Loan paid to Mr. Y $ 3,000
28-Aug: Received from sale of goods $ 1,940
30-Aug : Staff Salaries paid for Aug $ 1,500
Solution:
Square Limited
Cash Book
| Date | Receipts | V.No. | L.F | $ | Date | Payments | V.No | L.F | $ |
| 01 | O/B | 1,780 | |||||||
| 05 | Rent received | 450 | 04 | Electricity Bill Paid | 600 | ||||
| 08 | Received from Customer | 1,840 | 10 | Furniture Purchase | 1,800 | ||||
| 28 | Received against Goods sale | 1,940 | 13 | Raw Materials Purchase | 1,200 | ||||
| 14 | Loan Paid | 3,000 | |||||||
| 30 | Staff Salary paid | 1,500 | |||||||
| Balance C/d | 2,090 | ||||||||
| Total | 6,010 | Total | 6,010 | ||||||
Double Column Cash Book:
In Single Cash column cash book only cash column is maintained but in double column cash book both Cash and Bank column are maintained. For bank transactions it not necessary to open a bank account in the ledger.
In a cash column cash receipts and payments are recorded and in a bank column cheque issued for the payment and money received and deposited into bank account are recorded.
Cash deposited to bank account, or cash withdrawn from Bank:
- When Cash is deposited to into Bank account, Bank balance increases and cash balance decreases. Hence, Bank column is debited and cash column is credited. For example, $ 200 is deposited to Bank account can be shown in the cash book in the following manner:
| Date | Particulars | Cash | Bank | Date | Particulars | Cash | Bank |
| 01.08.2011 | To Cash | 200 | 01.08.2011 | By Cash | 200 |
- When Cash is withdrawn for office purpose, cash column is required to be debited and the bank column is required to be credited. Example as above.
- Entries for cash deposited to the bank and withdrawn from the bank are called “Contra Entries.” and should be indicated by (C) in L.F. Column. As
double entry is made for the contra items, no ledger posting in not needed.
Format of Double Column Cash Book:
| Date | Receipts | V.N. | L.F | Cash | Bank | Date | Payments | V.N. | L.F | Cash | Bank |
Treble Column Cash Book
Discount Column is added in Treble Column Cash Book. Hence, in addition to the Cash column and Bank Column, the discount column is also added. The Format of the Treble Column are presented below:
| Date | Receipts | V.N. | L.F | Discount | Cash | Bank | Date | Payments | V.N. | L.F | Discount | Cash | Bank |
Documents required for Cash Book Entries
The following documents are considered as the most essential documents for Cash Book entries. These documents are as follows:
- Cash Memo
- Receipts (Credit) Voucher
- Payments (Debit) Voucher
Cash Memo:
When goods are sold in Cash, the company have to issue a Cash memo to the customer against cash receipts from the customers. In this respect, the company has to print out a cash memo book in the duplicate page with a pre-numbered. One copy will give to the customers or other people while receiving the money and another copy will be kept in the book of cash memo. Original Copy will be given to customers and carbon copy retain with the cash book. The cash memo reference should mention in the Receipt Voucher.
Similarly, when the company purchased goods from the supplier, they have to collect cash memo from the customers and to be filed separately. Cash memo reference to be mentioned in the Payment Voucher.
Receipts Voucher:
This is also known as a Credit Voucher which is prepared at the time of receiving the money from the customers or any other persons. The receipts voucher number should be mentioned on the debit side of the cash book in the V.N. Column.
Payments Voucher:
This is also known as a Debit Voucher which is prepared at the time of payments. The voucher number should be mentioned on the Credit side of the cash book in V.N. Column.