Cash Book In any business, there will be numerous transactions relating to cash i.e. receipts and payments of cash.
On receipt of cash, the cash account is debited and on payment the cash account is credited. Cash Account can be prepared straightaway without journalizing the transactions. By doing so, much of clerical labor involved in making the journal is saved. Since cash transactions will be numerous, it is better to keep a separate book to contain only the cash account. This book is known as Cash Book.
Types of Cash Book
• Single column cash book (Simple cash book) – – – – Cash Transactions are recorded in chronological order Cash receipts on the debit side Cash payments on the credit side Difference is the cash in hand
• Double column cash book – – Discount and cash columns Only cash discount but not trade discount
• Three column cash book – Discount, cash and bank columns
Format of Single Column Cash Book Simple Cash Book: It is also known as the single column cash book. A simple Cash Book is ruled exactly like Ledger Account. Thus the format of the Cash book looks like this
Cash Book Dr RECEIPTS PAYMENTS Cr
000 2002 15.40.000 500 25. 2002 Jan.000 15.F PAYMENTS Cr. Sold goods for cash 5.) Date Particulars L.000 4.000 55.000 2.500
1 To balance b/d
2. Paid cash into bank 4.000 20.000 55.40. 1. Commenced business with 2. Paid for stationary 7.F. Paid to Gopal 10.000 4.000 20.000 Jan. Purchased goods for cash 4.000 500 10.000
2 4 5 8 10
By Bank A/c By Goods A/c By Stationary A/c By Gopal A/c By Office Furniture A/c 31 By Balance c/d
1.000 10. Date Particulars L. Amount (Rs. 00. Amount 1. Purchased office furniture Solution to the Example Solution: Cash book RECEIPTS Dr.000
.50. Received from Arun 8.
1 To Capital A/c 4 To Goods A/c 7 To Arun A/c
2. 25.Example of Single Column Cash Book Example: Enter the following transactions of Rajesh in single Column Cash Book.500
saying ‘To Bank…’ and it must also be entered in the bank column on the credit side. no cash discount is allowed unless payment is received from the customer. However. when cash is deposited in the bank. Cash discounts accompany cash receipts from customers and payments to suppliers. saying. ‘By Cash…. Format of a double column cash book Date Particulars LF Discount Cash Date (Rs) Particulars LF Discount Cash (Rs)
Format of Triple Column Cash Book
Modern business transactions with a bank are more than cash transactions. no cash discount is received unless payment is made to suppliers.Format of Double Column Cash Book
Normally cash discount is allowed to customers who pay promptly.) to indicate the contra transaction. the amount is entered in the bank column on the debit side and in the cash column on the credit side. Discount allowed is recorded on the debit side and discount received is recorded on the credit side. Payments out of bank are represented by the cheques issued by the firm which are entered in the bank column on the credit side. it is convenient to record discount received or discount allowed with cash payment or cash receipt.
. These entries are known as contra entries. One should note that the discount columns are not balanced but merely totaled. it is entered in the cash column on the debit side. This column will record • Payments into the bank • Payments out of the bank. Similarly. Inclusion of bank column in the Cash Book results in three column Cash Book. The letter ‘C’ is written in the column of ledger folio (L. Payments in cash will be entered in the cash column on the credit side and the receipts of cash will be entered in the cash column of the debit side. The double entry is completed in the Cash Book itself.F.’ Similarly. Payments into the bank are represented by cash or cheques paid into the bank account which are entered in the bank column on the debit side. When cash is withdrawn from bank for office use. Thus it is advantageous to have a column for banking transactions on each side of the Cash Book. Thus. This can be done by adding one amount column on each side of the cash book to record discount. Money at bank is as good as cash in hand.
This amount is written in the bank column on the debit side.000 2.e. 2002. The closing balances become the opening balances for the next period. When a person is allowed discount his/her account is credited with the total of the amount received from him/her and the discount allowed to him/her.000 500 980
. It should be noted that the total in the cash column on the debit side will always be higher than the total in the cash column on the credit side. the particulars column on the credit side indicates the amount on whose account the payment is made. The difference is cash at bank and should be written in the bank column on the credit side. This means that the payments have exceeded the receipts. The other two columns are balanced separately.’ Posting in the Cash Book: The particulars column on the debit side of the Cash Book indicates the amount on whose account the money was received. Such difference represents cash in hand.
2002 Cash in hand Jan 1 Cash at bank 2 5 8 12 Paid into bank Brought furniture and issued cheque Purchased goods for cash Received cash from Mohinder
2. Similarly.00 1. The difference is written in the cash column on the credit side. In case of a bank overdraft. sometimes it may be possible that the bank column on the credit side is more than the column on the debit side. the total of the bank column on the debit side is bigger than the total of the bank column on the credit side. The difference represents money overdrawn. Format of a three column cash book Date Particulars LF Discount Cash Bank Date Particulars LF Discount Cash Bank (Rs) (Rs)
Example of Three Column Cash Book Example: Prepare a triple column Cash Book from the following transactions of Madhura Enterprises for the Month of January. Normally. However. i. the opening balance is written in the bank column on the credit side as ‘By balance b/d….As it was said earlier the discount columns are merely totaled and are not balanced.500 10. Bank overdraft.
Cash Bank (Rs.980 By Bank C By Furniture By Purchase A/c By Amarnath C A/c By Bank A/c By Drawings C A/c By Cash A/c By RentA/c By Balance c/d – 1.000 800
Solution to the Example Date Particulars LF Dis.) (Rs.580 5.Discount allowed to him 14 16 19 23 24 Cash sales Paid to Amarnath by cheque Discount Received Paid into Bank Withdrawn from bank for private use Received cheque from Patel Allowed him discount 28 31 Withdrawn cash from bank for office use Paid rent by cheque
20 4.000 1.450 50 400 600 1.000 – 500 – 50 – 1.000 – – – 2.) (Rs.480 12.) (Rs.) (Rs.) 2002 Jan.000 2 – 1.1 To Balance b/d
7.000 28 31 31 40 9.490 20 2.500 10.000 800 5.) 2002 Jan 2.480 12.000 – 16 400 19 – 1.450 – 400 – – 600 – – 2.830 7.580 50 9.430 23 20 2.000 5 –8 20 980 4. 1 2 12 14 19 24 28 To Balance b/d C To Cash A/c To Mohinder A/c C To Sales A/c To Cash C Account To Patel A/c To Bank A/c Date Particulars LF Dis Cash Bank (Rs.830
Cash sales are not entered in the Sales Book. Purchase Book. these must not be entered in the Sales Book. Credit sales of things other than the goods have to be dealt with especially in accounts. Names of suppliers appear in the purchase book. A bill of exchange is a promise to pay the amount specified therein on the expiry of the period for which the bills is drawn. It is also called general journal. hence. Purchase Returns Book: It is also called ‘Return Outwards Book’. The total of the purchase book is posted to the debit of Purchases Account. Here. Bills Receivable Account: The bills receivable of an enterprise consist of promissory notes and bills of exchange. The Bills Receivable book is used to record all promissory notes given or bills of exchange accepted by customers. Sales Book. The book maintained to record these transactions is called journal proper. namely. The total of the Sales Book is credited to Sales Account. Sales Book: Sales of goods are entered in a register. credit purchases of things other than goods and materials have to be dealt with especially in accounts and hence these must not be entered in the Purchase Book. Cash purchases are not entered in the Purchases Book. The book in which the purchase returns are entered is the Purchase Returns Book. Journal Proper: All those transactions for which no special journal is maintained are recorded by passing journal entries. A separate book is maintained to record the purchase returns. Bill of receivable is treated as the bill receivable by the seller and as bill payable by the buyer.
. Sales Returns Book: The name of the book in which the sales returns are recorded is called Sales Returns Book. Bills Payable Account: The bills payable consists of all promissory notes given or bills of exchange accepted by the business in respect of amounts owe to its suppliers. Also. the ruling is that only credit purchases of goods dealt in the firm or raw materials and stores used by the firm are entered in the Purchase Book. The total of Returns inwards Book is debited to Returns Inwards Account.Subsidiary Books The other subsidiary books used in an organization Purchase Book: Purchases of goods are entered in a register. namely. The total of Purchase Returns Book is credited to the Purchase Returns Account. Only goods sales on credit are entered in the Sales Book. The Bills Payable Book is used to record all such promissory notes given or bills of exchange accepted by the business. It is also called ‘Returns Inwards Book’.