CASH BOOK

The cash book is merely the cash account removed from the
ledger and bound in a separate book for the sake of
convenience.

Cash transactions are usually numerous in any business

concern; it is therefore to secure efficiency in work that a
separate book is used to record all cash transaction.
 Cash book – a journal or ledger
Cash book has a dual role : (journal)

• Journals are divided into various subsidiary

books and cash book is one of those.

• All the entries are posted in the cash book

first and ledger entries are posted there
from.thus it act as a subsidiary to the ledger.
Continued….
• Cash book as a ledger:

• It contain a condensed and classified record

of all the transaction.

• The ruling of the cash book does not differ

from that of ledger.
 Advantage of maintaining a cash book
• It prevents duplication of work

• Both cash and bank transactions can be recorded

in the cash book.

• Provides trader with the daily cash and bank

balance
 Types And Structures Of The Cash Book
(single column cash book)
 Rules for preparing a cash book

• Debit the cash book (cash column) by all

the cash and cheques received, except:

1 Payment made direct to the bank, interest

received by bank.

2 Cash and cheques paid into the bank on the

same day as received.
Continued…..
• Debit all the cash book (bank column) with
all the amount paid into the bank or
received by the bank.

• Credit the cash book (cash column) with all

payment in cash, and with any cheques
received from the customer (debtors) and
endorsed over to customers
Continued…..
• Credit the cash book (bank column) with :

1 All payments by cheques drawn on the bank.

2 All payment made by the bank on order to

pay, other than by drawing of cheque.
 Continued…..
• Contra entries ( i.e. payments from office cash to the
bank and vice – versa, written as C in the folio
column)

1 payments from the office to the bank : when paying money out
of the office cash book into the bank “ To Cash Rs….”, since
bank balance increases, and credit the cash column “ By Bank
Rs….”, since the cash gets reduced.

2 payments from the bank to the office : when drawing money

from the bank for office purpose , debit the cash column “ To
Bank Rs….” , since the office cash increases, and credit the
bank column “By Cash Rs….”, since the bank balance gets
reduced
 Dishonored cheques:
• The balance in the bank is reduced by the
amount of the dishonored cheque.

• The amount of the cheque must be entered into

the bank column on the credit side of the cash
book

• Thus, 10th April, By K. Sen…., cheque

dishonored Rs: 2500/- ( example)

• The corresponding entry will be shown on the

K. Sen. A/C as he owes that amount.
 Drawings by the proprietor

• Drawing are made by the proprietor of

the firm.

• Drawing are made for personal use.

• Drawings are credited to the cash book

and debited to the drawing account.
 Bank loans and overdrafts
• Bank makes a loan, the amount of the loan
must be debited in the bank column of the cash
book, and be posted to the credit of a bank
loan account, opened by the borrower in the
general ledger.

• Interest is payable on the full amount of the

loan whether used or not, this interest is
credited to the bank in the bank column and
debited to a bank interest account in the
general ledger
 Continued…..
• Overdraft means a person is allowed to
withdraw money up to his stated limit
for a limited period of time.

• The amount will appear as a credit

balance in the bank column of the cash
book.

• Interest charged by the bank will be

treated in the same way as in bank’s loan
interest
Illustration
Single column recording cash and bank
transaction separately
Triple column cash book