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Cash book is the special journal which
is used for recording all cash
transactions. It may be defined as the
book in which transactions are
recorded in detailed particulars of all
money received and paid.
Cash book is divided into two parts ;
A) Cash receipt
B) Cash payment
FEATURES OF CASH BOOK
• To keep record of only cash transactions
• All receipts are recorded in debit side
• All payments are recorded in credit side
• Chronological (date wise) transaction recording of all
transactions.
• Performs function of both journal and ledger.
Date Particular Lf Cash Date Particular Lf Cash
` `
Cr
.
To ascertain the balance of cash in hand and at bank at any time
without actually counting cash and examining Bank passbook
To verify the correctness of cash in hand and bank.
IMPORTANCE OF CASH BOOK
It is both a subsidiary book and a principal book.
It helps the trader to understand the cash in hand and cash at bank.
It gives information about
daily closing cash and bank balance at the end of
each day.
It is an account in the ledger.
Cash account is opened in the ledger and posting is done in this account from journal.
When Transactions of cash are recorded in journal . it is necessary to open a cash A/c in ledger.
It is separate book maintained
for recording Cash transaction.
It is book of original entry
because all cash transaction
are first of all recorded in cash
book and posted from cash
book to various account in
ledger
When transactions of cash are
recorded in Cash book, there
is no necessity to open a Cash
A/c in the ledger.
DIFFERENCE BETWEEN CASH ACCOUNT AND CASH BOOK
Discount allowed is given to customers by the business when they pay their accounts quickly.
The discount allowed is put on the debit side of the cashbook.
DISCOUNT RECEIVED
The business also receive a discount from its
suppliers if it pays its accounts quickly and this
is called discount received.
The discount received is put on the credit side
of the cashbook.
The discount column in the CASH BOOK are merely
totalled and not balanced.
Discount account are opened again in ledger and
totals of discount columns in the CASH BOOK are
posted there.
Discount column is only memorandum column and
not based on double entry system.
• Bank Overdraft is the excess amount withdrawn from the bank account than the amount deposited in it.
• Bank over draft is recorded in the credit side of the cash book in bank column.
Two (Double) Column Cash Book
When discount is allowed on the receipt of
cash and discount is received when payment
is made to suppliers, it becomes desirable to
add discount column along with cash on both
sides of the cash book.
Format of Double Columns Cash Book
Date Particulars L.
F
Discount Cash Date Particula
rs
L.
F
Discount Cash
` ` ` `
Dr
.Cr.
Format of Double Columns Cash Book
Date Particulars L.F Bank Cash Date Particular
s
R.No. L.
F
Bank Cash
` ` ` `
Dr
.Cr.
Some transactions are recorded in a Cash
book and bank book ,i.e., balance of one
decreases and that of the other increases
due to such transactions. Such transactions
are entered on both sides of the cash book.
Such entries are known as Contra Entries. It
is denoted by
Jan 4 `2000from office and deposited in bank
Jan 8 ` 3500 are withdrawn for office use
Date Particul
ar
L .f Cash
(`)
Bank (`) Date Particul
ar
L .f Cash
(`)
Bank
(`)
Jan. 4 To cash C - 2000 Jan.4 By bank C 2000 -
Jan . 8 To
bank
C 3500 - Jan . 8 By cash C - 3500
Three column cash book is a cash book
which has three columns on each side; one
column to record discount allowed, another
to record discount received, another to
record cash transactions and yet another to
record bank transactions. In other words,
we can say that triple or three-column Cash
Book represent two account i.e., Cash
account and bank account .
Date Particulars L.F.Discount Cash
Bank Date Particulars L.F. Discount Cash
Bank
2013
Jan.1 To Balance
b/d
1,550 13,575 Jan 1 By Office
Equip.
750
Jan 1 To Sales a/c 1,315 Jan 3 By Bank c 500
Jan 3 To Cash a/c c 500 Jan 6 By
Purchases
a/c
1,005
Jan 4 To A Hussan 2,550 Jan 8 By Bank c 2,550
Jan 8 To Cash c 2,550 Jan 16 By Salman 5 915
Jan 10 To Hayat
Khan15 775 Jan 27 By Gulzar 650
Jan 12 To Sales a/c 1,500 Jan 30 By Salaries
a/c
1,750
Jan 31 To Cash c 775 Jan 31 By Bank c 775
Jan 31 To Bank c 250 Jan 31 By Cash c 250
By
Balanced
c/d
1,865 14,330
2013
feb 1
To balance
b/d
1,865 14,330
Jan.1Purchased office typewriter for cash `750;
cash sales `315Jan 31 Deposited into bank the cheque of Hayat Khan.Jan 30 Paid salaries by cheque `1,750Jan 27 Paid to Gulzar Ahmad by cheque `650Jan 16 Paid Salman `915 by cheque, discount received `5
Jan 12 Sold merchandise to Divan Bros. for `1,500 who paid by cheque which was deposited in the bank.
Jan 10 Received from Hayat Khan a cheque for `775 in full settlement of his
account and allowed him discount `15.Jan 8 Deposited into bank the cheque received from A. Hussan.Jan 6 Paid by cheque for merchandise purchased worth `1,005
Jan 4 Received from A. Hussan a cheque for
`2,550 in part payment of his accountJan 3 Deposited cash `500Jan 31 Drew from bank for office use `250.
• Endorsement of a cheque :-Sometimes, a
cheque received from a customer is not
deposited into bank, but it may be given to some
other persons i.e., endorsed. On receipt, it will
be entered in the cash column on the debit side.
On endorsement, it will be entered in the cash
column on the credit side
• Bank charges :- Bank usually charges some
amount for the services rendered to its
customers. Such charges will be recorded on the
credit side as ‘By Bank Charges` and the
amount will be recorded in the bank column.
.
Some important Transaction
• Bank charges on dishonored
cheques:- Expenses charges by the
bank on dishonored cheques will be
added into the amount of dishonored
cheques itself.
• Amount directly deposited by a
customer into our Bank A/c:- When
the information of such a deposit is
receive by the trader, it will be
recorded on the debit side of the cash
book and amount will be entered in
the bank column.
•Internet allowed by the bank:- Internet allowed (credited) by the bank increases the balance at bank. The entry for such interest is, therefore, recorded on the debit side in the bank
column.
• Internet charges by bank:-
when interest is charged (debited) by the bank on the amount of bank over draft, the entry is recorded on the credit side in
bank column.
• The petty cashier is given a definite sum, says `2,500, at the time beginning of a certain period. this amount is called 'imprest amount'.
• The petty cashier goes on paying all petty, say after a month, the chief cashier reimburses the amount actually spent by the petty expenses out of this impress amount and records them in the petty cash book maintained by him.
Cash column of the cash book, will always have a debit balance, because cash payment cannot be mare than the cash in hand.
Bank column of the cash book can either debit balance, because in bank column in the cash book represents bank account.
Bank account will have a credit balance if it is overdrawn and will otherwise have a debit balance.