Cash Book

Transactions involving cash are recorded in a book known as a cash book. It is usually made on daily updates. This is a very important book that is used by all entities, large and small, for-profit and non-profit. It functions as a journal account as well as a ledger (cash) account.

It’s also known as the original entry book. Cash transactions are not recorded in the journal when using a cash book, and no separate account for cash or bank is necessary for the ledger.

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Different types of cash books:

There are four different types of cash books maintained by the companies for accounting purposes. These are

Single column cash book: All cash receipts are recorded on the left hand (debit) side and all cash payments are recorded on the right hand (credit) side in chronological sequence.

On both the debit and credit sides of the single column cash book, there is just one column for the amount, which is balanced on a T-account basis. A single column cash book records cash transactions solely. In a single column cash book, entries for checks issued, checks received, purchases discount, and sales discount are not noted.

The format of a single column cash book is given below:

SINGLE COLUMN CASH BOOK

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Double column cash book: There are two amount columns on either side of the cash book in this sort of cash book. One is for cash transactions, and the other is for bank transactions. These days bank transactions are extremely numerous. Today almost in all organisations, all receipts and payments are processed through the bank as much as possible; hence a bank column records all cheques, payments and receipts made through a bank and serves as a bank account. Usually, at the end of one month, both columns are tallied and balanced in a  T- shaped account.

Triple column cash book: On both the debit and credit sides of a three-column cash book, also known as a triple column cash book, there are three money columns: one on each side for recording discount, cash, and bank amounts.

If a company has a bank account and routinely makes receipts and payments through that account, a three-column cash book is preferable to a single or double column cash book. Discounts for

Early payment is a common practice among businesses.

Three columns are supplied for the amounts on each side in a three-column cash book. Cash revenues are noted in one column, banking transactions in the second, and discounts received and authorised in the third.

While single and double column cash books can be used instead of a cash account, the three-column cash book can be used as both a cash and a bank account.

Petty cash book: Petty Cash Book is an accounting book used to record little and low-value expenses such as stamps, postage, travelling, stationery, carriage, daily salary and miscellaneous expenses.

Petty expenses are those that are incurred on a daily basis; they are frequently big in quantity but small in value. A separate book known as a petty cash book is kept to record such expenses. It can be kept up by either the regular or the imprest systems.

What does a cash book record?

A cashbook keeps track of all cash transactions in great detail. A cash account, on the other hand, is an account that appears in a general ledger. A cash account is more like a ledger, although a cash book can be used as a journal and a ledger at the same time. A cash book is the main entry book that falls within the category of a special journal. It can also operate as a supplemental ledger because it stores credit and debit entries in the form of an account. A cash book contains more information than a cash account. A cash book will be recorded in chronological order all cash receipts and payment transactions for a firm, but it can also include bank account transactions when cash is deposited at the bank, withdrawals etc. 

“Cash” refers to any type of immediate cash payment for a good or service. This does not only apply to transactions involving banknotes and coins; it also applies to market stock transactions, as long as the payment is made immediately. Debit payments are treated as cash because the money is immediately taken out of the account, whereas credit purchases, cheques, and money orders are treated as bank account transactions.

As they provide greater data, recording transactions in a cash book rather than a cash account makes it easier to maintain and monitor cash balances and identify faults or inaccuracies. Unlike cash accounts, which are usually reconciled once a month, cash books are updated and validated on the go.

Cash book is a double-entry system 

In a double-entry bookkeeping system, every transaction is recorded in two accounts: a debit to one account and a credit to another.

The following are principles are followed while documenting the double-entry system of bookkeeping:

• The debit is written on the left, and the credit is written on the right.

• Every debit must be matched by a credit.

• The benefit is received by debit, and the benefit is given by credit.

A cash book’s transactions have two sides: debit and credit. All cash receipts are recorded as a debit on the left side, and all cash payments are recorded as a credit on the right side, by date. The difference between the left and right sides of the cash on hand balance should be a net debit balance if cash flow is positive.

CASH BOOK

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Conclusion 

Debits are entered date-wise on the left side, credits are entered date-wise on the right side. A separate cash book in the ledger is not opened when a cash book is kept. The cash book is balanced in the same way that a ledger account is. However, because cash payments can never exceed cash revenues and cash in hand at the beginning of the quarter, there will always be a debit balance in the cash book. The duplicate copy of the cashier’s receipt is usually the source document for cash receipts.

Any document, invoice, bill, receipt, or other item used to make a payment will be used as a source document for recording transactions in the cash book. All of these documents commonly referred to as vouchers are given a serial number and kept in a separate file for future reference and verification after payment has been made.