ABSTRACT

A cash book is a subsidiary ledger in which are stored all cash receipt and
cash payment transactions. It is the primary repository of cash-related
information for a business. The information in the cash book is periodically
aggregated and posted to the general ledger. The information in the cash
book is routinely compared to the bank's records via a bank reconciliation to
ensure that the information in the book is correct. If not, an adjusting entry is
made to bring the cash book into conformance with the bank's information.

The cash book is commonly subdivided into a cash receipts journal and a
cash disbursements journal when there are a large number of transactions.
Doing so reduces the clutter in a single source document or file. In a smaller
business that experiences less transactional volume related to cash, all cash
transactions are recorded within a single cash book.

The information in a cash book is entered in chronological order, which

makes it easier to research transactions at a later date. A common
researching path is to begin with a possible cash issue in the general ledger,
and then trace the posting entry back to a specific date range in the cash
book.

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 INDEX
SL No Particulars Page No
1 Introduction 3
2 Features 4-5
3 Advantages of Cash book 6-7
4 Importance of Cash book 8-9
5 Types of cash book 10-12
6 Problem 13-16
6 Conclusion 17
7 Reference 18

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INTRODUCTION
Cash is an essential medium of conducting transactions taking place in a
business and needs to be recorded for maintaining proper bookkeeping of the
transactions. Cash is a current asset, and examples of cash transactions can
be bank overdraft, money orders, demand deposits. This leads to the need for
maintaining all cash transactions in one place for the business and
necessitates the use of a cash book. In any business or organization, there are
always many daily cash transactions. They may range from a handful to
thousands in a day. So there is a separate cash book to keep track of the
receipts and payments made in cash. Let us learn more about the cash book
and types of cash books. A cash book is that unique book of accounts which
fulfils the objective of both, a journal and a ledger. Like a journal, it is the
first book which records all the cash transactions of the business. It also acts
as a subsidiary book to post all the cash transactions, similar to a cash
account in the ledger. It can be broken down into two words, i.e., ‘cash’ and
‘book’. Cash is a real monetary instrument like currency, i.e., coins or notes
used as a medium of exchange for acquiring goods and services. Book refers
to a compiled record of the information available in the written or printed
form. Thus, we can say that cash book is the record of all the business
transactions in the form of notes or coins, taken place in a particular period.

Definition

Cash book is a special type of book that is only concerned with the recording of
cash transactions of an organisation. It performs the dual role of both journal
and a ledger for all the cash transactions taking place in a business organisation.

A cash book records all the cash receipts on the debit side and all the cash
payments of the organisation on the credit side.

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Features

Knowing about the essential characteristics of a general cash book will help us
to understand more about it

1. An important feature of the cash book is that it only records cash and
bank transactions. It does not record any credit transactions.
2. One of the main features of a cash book is that it records all transactions
in chronological order.
3. It has two sides. The Debit side records cash receipts and the credit side
records cash payments transactions.
4. One of the key features of a cash book is its initial or opening balance.
The debit side of the cash column displays the opening debit balance of
cash and the credit side of the bank column displays the opening credit
balance of cash. The cash column always shows the debit balance.

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5. Cash payments can never be greater than cash receipts. As a result, cash
books usually show a debit balance. However, if the total amount of the
debit side (receipts) is equal to the total amount of the credit side
(payments) in the cash book, the balance is zero.
6. In the cash book, the cash or bank transactions (receipts and payments)
are recorded in chronological order at the time of their occurrences, that’s
why it is called the Journal. Again, its format is similar to that of the
Ledger and the balance is taken out like those of Ledger. So the cash
book is both Journal and Ledger.
7. Another important feature of the cash book is that the cash transactions
are recorded in it transferred directly from the cash book to their relevant
Ledger account.
8. The balance of the cash book is transferred directly to the Trial Balance.
Therefore, it is not necessary to store any cash account in the Ledger
Book.
9. Cash transactions are recorded in a cash book or a special book, i.e. a
cash book, without being recorded in a journal book.
10.The balance of the cash book is equal to the organization’s cash fund. So
any day, the calculation of the balance of the cash book can be compared
in conjunction with the cash fund.
11.Cash transactions are written directly in the cash book, so a brief
explanation is required in the cash book to know the nature of the
transaction.
12.The Cash Book is written through the Debit Credit Analysis.
Consequently, a financial transaction cannot be called a business
transaction without a debit credit.

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Advantages of Cash Book

1. Cash receipts and cash payments for a particular period can easily be
ascertained from the cash book.
2. Since cash transactions are recorded in the cash book, it becomes
convenient to find any cash transactions for future reference.
3. It avoids the journalization of huge cash transactions.
4. The amount of cash in hand can be ascertained at any time, and it can be
compared with the cash in a cash box. This ensures the accuracy of the
cash book and detects »misuse or misappropriation of cash.
5. Cashbook minimizes time and labor in preparing the ledger as it performs
both the journal and ledger functions.
6. Proper maintenance of the cash book influences the cashier’s morality,
which refrains him from stealing cash.

Cash Book is both a Journal and a Ledger

Some accountants term cash book as a journal and some others term it
as a ledger. Modem accountants term cash book both as journal and
ledger.

Cashbook is a journal; because:-

 After the transactions, these are recorded in the cash book in

chronological order of dates with explanations like a journal.
 How transactions are posted into the ledger from the journal is followed
in the case Of posting transactions to the ledger from the cash book.
 As separate special journals are maintained for various transactions, cash
book is similarly maintained for cash transactions.
 Cash transactions are recorded in the cash book according to debit and
credit.
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  Other than cash book, no subsidiary journal is maintained for cash
transactions.

For all these features of the cash book, it is called a journal.

Cashbook is a ledger; because:-

 The format of the cash book is similar to that of a ledger account.

 Like a ledger account, the cash book consists of two sides – the debit side
and the credit side if prepared in ‘T’ format.
 Like ledger accounts, the balance of the cash book is determined and
transferred to the trial balance.
 The cash book serves the purpose of the cash account. In such a case, the
cash account is not prepared in the ledger.

The cash book is called a ledger because of its above-mentioned characteristics.

It is very much evident from the above discussion. Cash book is both journal
and ledger as it contains all journal and ledger features and serves purposes of
both.

Importance of Cash Book

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In the current accounting system, the importance of the cash book is
immense. Cash transactions are more likely to result in transactions
occurring within an organization. With the exception of cash transactions, all
business organization activities will be stopped.

The importance of a cash book is as follows:

1. The total cash receipts and payments of the business are easily known
at any time from the cash book
2. The amount of cash in hand may be known at any time without having
to count the cash box if the cash book is properly maintained.
3. Since the Cash Book is both a Journal and a Ledger, it is possible to
take advantage of both the Journal and Ledger from the Cash Book.
4. Since all cash transactions are recorded in one place in the cash book,
it is not difficult to obtain any information about the cash transaction
in the future.
5. It is very easy to calculate the amount of cash in hand at any time from
the cash book, and it can be compared to the money in the cash box so
that the accuracy of the account and any kind of fraud can be easily
caught.
6. The cash book may also be used to preserve the initial and accurate
accounts of cash transactions. Maintaining cash books can help
prevent labor and time loss.
7. Cash security can be ensured as the cash balance of the cash book
must be reconciled with the cash balance of the fund.
8. It’s easy to detect any errors, as all cash transactions are recorded in
the cash book.
9. The cash book shows the amount of money that’s lying idle in the
business. As a result, idle cash can be invested at any time in any other
business.

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 10.Since all types of cash transactions are recorded in the Cash Book, any
cash transaction information relating to expenses is available from the
Cash Book at any time in the future.
11.As soon as cash transactions are completed, they can be recorded
directly in the cash book without entering the journal book. As a
result, the organization does not need to prepare a lot of journal
entries.
12. If the cash book is maintained properly, the preparation of the Journal
and Ledger may be avoided.
13.All the owners of the business give strict orders to the accountants to
balance cash funds on a daily basis in the business. As a result, a
business organization can find out the amount of its cash on a daily
basis.
14. It is therefore essential that the organization monitors the liquidity
situation and preserves the cash book in order to know the amount and
consequences of the cash transactions.

Types of Cash Book

Generally, a cash book is of two types –

1. General cash book.

2. Petty cash book.
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3 types of general cash books are detailed.

1. Single column cash book,

2. Double column cash book,
3. Treble column cash book.

1. Double Column Cash Book

The cash book containing two money columns – cash column and bank column
on both sides for recording cash and bank transactions is called a double column
cash book.

All cash receipts and all bank deposits are recorded on the debit side, and all
cash payments and all payments through cheques are recorded on the credit side
of this cash book.

Cash receipts are recorded in the cash column of the debit side, and cash
payments are recorded in the cash column of the credit side. Cash and cheques
deposited in the bank are recorded in the bank column of the debit side, and
payment by cheques are recorded in the bank column of the credit side.

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The debit balance of the double column cash book indicates cash in hand and
cash at the bank of a particular date of concern.

There might be a credit balance of the bank column, indicating bank overdraft
or excess withdrawn over deposits.

Method of Preparing Double Column Cash Book

Preparing a double column cash book is almost similar to that of the single
column cash book. The double-column cash book system has been introduced to
avoid complexity in posting bank transactions in the single column cash
book.Here all bank transactions are directly recorded in bank columns.When
preparing a double column cash book, it is to be kept in mind that all types of
cash receipts are to be recorded in the cash column of the debit side, and all
bank deposits are to be recorded in the bank column of the debit side.

On the other hand, cash payments are recorded in the cash column of the credit
side, and payments through cheques are recorded on the debit side.

2. Treble Column Cash Book

The cash book containing three money columns on both sides is called a treble
column cash book. The columns are ‘Cash,’ ‘Bank,’ and ‘Discount.

In a treble column cash book, there are three money columns on both sides for
recording transactions relating to cash, bank, and discount.

Like the double column, cash book cash receipts and bank deposits are recorded
in the debit cash column and bank column respectively of the treble column

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cash book, and cash payments and payment by cheque are recorded in the credit
cash column and bank column, respectively.

The discount allowed to the customer for realizing debits is recorded in the
debit discount column of the treble column cash book, and discount received
from suppliers or creditors in making a payment is recorded in the credit
discount column of the treble column cash book.
In preparing a treble column cash book, it must be carefully noted that discount
columns need not be balanced.
The total debt discount column and the total credit discount column are treated
as separate balances.
The total debt discount column means expense, and the total credit discount
column means income.

Problem

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Record the following transaction in a suitable cash book of Ms. Anjum Iqbal for
the month of March 2017, and show the closing balances of cash and bank

1 He had cash in hand ………………. 50,000

2 Opened a Bank Account ………….. 30,000
4 Received cash from customer Ahmed . 4,000
6 Paid to creditor Ali by bank ……..…… 500
7 Purchase by cash ……………………… 1,000
10 Rent paid ……………………………… 250
11 Owner withdrawn by bank …………… 3,000
12 Cash Sales …………………………….… 5,000
14 Received check from Debtor Jamal … 10,000
15 Paid wages …………………………… 200
17 Buy furniture paid check ……………… 4,000
19 Cash Purchases of Inventory………… 3,000
20 Deposited Jamal’s check ……………… 10,000
21 Drawing by cash ……….……………… 1,500
22 Paid Electricity bill by check ……………. 350
23 Taxes payment made …………………. 100
24 Merchandising purchases by bank .…… 7,000
25 Sales by check (not deposited) …………12,000
26 Sales to Bilal on credit …………………. 5,000
27 Purchase Machinery ……………………… 2,000
28 Received debtor’s check and deposited .. 3,000
29 Paid railway freight by bank ……………… 250
29 Purchase stamps & stationery………..….. 20
30 Withdrawal cash for business use ……..… 2,500
Solution

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 May 01: Cash balance $2,200, bank overdraft $365.

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  May 03: Paid J & Co. by cheque $1,200, discount received amounting to $15.

 May 05: Received from A & Co. a cheque for $980, discount allowed to them $20.

 May 07: Deposited into bank the check received from A & Co. on May 05.

 May 10: Purchased stationery for cash, $150.

 May 15: Purchased merchandise for cash, $1,300.

 May 15: Cash sales for the first half of the month, $2,350.

 May 16: Deposited into bank $1,600.

 May 18: Cash withdrawn from bank for personal expenses $150.

 May 19: Issued a cheque for merchandise purchased, $1,650.

 May 21: Drew cash from bank for office use, $650.

 May 24: Received a cheque from S & Sons and deposited it into bank, $1,560.

 May 25: Paid a cheque to Ali Inc. for $400 and received a discount of $15.

 May 27: Purchased furniture in cash for office use, $390.

 May 29: Paid office rent by cheque, $450.

 May 30: Cash sales for the second half of the month, $4,300.

 May 31: Paid salaries by check, $1,760.

 May 31: Withdrew cash from bank for office use, $1,470.

 Required: Record the above transactions in a three column cash book.

Solution

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Conclusion

A cash book is a useful tool for cash management.

Maintaining one properly is essential for good and strong bookkeeping and
accounting. With proper internal controls in place, a business can protect its
most liquid asset: cash. As a cash book can contain information regarding all
of a business’s cash transactions, it paves the way to efficient cash
management. It is highly recommended that you maintain a cash book for
your business (unless it has very low cash transactions).

With one, you can manage your business’s cash much easier.

You’d have easier access to information about your business’s cash

transactions too.

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Reference

Author- A.K Jain and Varun Jain (2016)

Title of the Book-Accountancy (Pg No- 1.30-1.35)
Author-Mike Piper (2015)
Title of the Book-Accountancy (Pg No- 2.60-2.65)
Author- Kenneth Boyd (2012)
Title of the Book-Accountancy (Pg No- 1.80-1.86)

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