Cash Book Or Cash Journal
A Compilation Of All Cash & Bank Transactions:

Cash Book or Cash Journal is a compilation of all cash and bank transactions-cash receipts, bank deposits and cash payment and bank withdrawals recorded chronologically and helps to reconcile cash balance with bank statement.

Basically to prepare Cash Book we need to have cash payment vouchers, cash receipt vouchers and contra vouchers. Therefore, first of all, the cash vouchers are prepared for all the transactions relating to cash then these vouchers are recorded in cash book under accrual basis of accounting.

Cash book has two sides - receipt side and payment side with columns like date, particulars, ledger folio and amount. Receipt side is called as debit side of cash account and the payment side is called the credit side of cash account. All cash payment vouchers are recorded in payment side and all cash receipt vouchers are recorded in receipt side.

Vouchers for contra entries or Contra vouchers relating to cash are also recorded in cash book.

If the cash is withdrawn from bank then the voucher is written in receipt side of cash book if the cash is being deposited into bank the contra voucher is recorded in payment side of the cash book.

Cash is treated as assets and falls under Real Account. As such, Any increase in Cash or Bank is debited to the respective account and the reverse is also true; any decrease in Cash or Bank account is credited to the respective account. A Cash Book normally shows a debit balance.

A Cash book consists of Cash Account and Bank Account.

Cash is treated as assets and falls under Real Account. As such,

Any increase in Cash or Bank is debited to the respective account and the reverse is also true;

Any decrease in Cash or Bank account is credited to the respective account. A Cash Book normally shows a debit balance.

Types of Cash Book

  1. Single Column Cash Book: With Cash Column Only
  2. Double Column Cash Book: With Cash and bank Column
  3. Triple Column Cash Book: With Cash, Bank and Discount Column

Single Column Cash Book:

Single column cash book records cash receipts and cash payments only. It contains only one cash column on each side (debit and credit) of the cash book. All the cash receipts are entered on the debit side and the cash payments on the credit side.

Here it is to be noted that while writing cash book, the rule for real account is followed:

Debit what comes in and

Credit- what goes out

Posting:

While writing up a single column cash book the following points should be kept in mind:

  1. The pages of the cash book are vertically divided into two parts. The left hand side called debit side (Dr.) is for recording receipts and the right hand side called credit side (Cr.) is for recording payments.
  2. A Cash Book starts with an opening balance brought forward from the preceding period. It appears at the top of the left side as "To Balance b/d" or "To Capital" in case of a new business.
  3. The transactions are recorded according to date of occurrence
  4. Any amount received is recorded in the particulars column on the left hand side of the cash book and Any amount paid is recorded in the particular column on the right hand side of the cash book
  5. It should be balanced at the end of a given period.

Double Column Cash Book:

A double column cash book consists of two separate columns on the debit side as well as credit side for recording cash and discount. In many concerns it is customary for the trader to allow or to receive small discount off or against the dues. These discounts are made for prompt settlement of accounts. The discount column on the debit side of the cash book will record discounts allowed and that on the credit side discounts received.

Posting:

Posting in the cash column is done in the same way as in the single column cash book. But regarding discount column, each item of discount allowed is posted in the debit side of the cash and each item of discount received will is posted to the credit side of the cash book.

Total of the discount column on the debit side of the cash book will be posted to the debit side of the discount account in the ledger and the total of discount column on the credit side of the cash book on the credit side of the discount account. The discount columns are not balanced like cash column of the tow column cash book.

Three Column Cash Book:

A three column cash book or triple column cash book is one in which there are three columns on each side - debit and credit side. One is used to record cash transactions, the second is used to record bank transactions and third is used to record discount received and paid.

When a trader keeps a bank account it becomes necessary to record the amounts deposited into bank and withdrawals from it.

For this purpose one additional column is added on each side of the cash book. One of the main advantages of a three column cash book is that it is very helpful to businessmen, since it reveals the cash and bank deposits at a glance.

Posting:

  1. The opening balance of cash in hand is recorded in the cash column and that of cash at bank is recorded in the bank column. In case the opening balance is Credit balance (Overdraft) then it will be in the credit side of the cash book in the bank column.
  2. If a cheque is received and is paid into the bank on the same date it will appear in the bank column in the debit side of the cash book. But if the cheque received is not deposited into the bank on the same date then the amount will appear in the cash column. Cash received will be recorded in the usual manner in the cash column.
  3. When payment is made by cheque, this will appear in the bank column on the credit side . and if the payment is made in cash it will be recorded in usual manner in the cash column.
  4. If an amount is entered on the debit side of the cash book, and the exact amount is again entered on the credit side of the same account, it is called "contra entry". Similarly an amount entered on the credit side of an account also may have a contra entry on the debit side of the same account.
  5. When Cash is deposited into bank, credit side of the cash book will be recorded as "By Bank" and the amount will be entered in the cash column. On the debit side of the cash book, it will be posted as "To Cash" and the amount will be posted in the Bank Column. The reason for making two entries is to comply with the principle of double entry which in such transactions is completed and therefore, no posting of these items is necessary. Such entries are marked in the cash book with the letter "C" in the folio column.
  6. When Cheque is drawn from bank, entry will be made on the debit side, cash column "To Bank" and on credit side, bank column "By Cash".
  7. Bank charge is treated as expenses and it appears on the credit side, bank column "Bank Charges."
  8. Bank interest allowed by bank is treated as income for the firm and it appears on the debit side, bank column "To Interest".
  9. As regards discounts the total of the discount allowed is posted to the debit of the discount account in the ledger and total of the discount received to the credit side of the discount account.

Balancing of Cash Book:

A cash book is balanced like any other account. The total of the receipt side (debit) column will always be greater than the total of the payment side (credit) column. The difference will  be written on the credit side as "By Balance c/d". In the beginning of the next period, to show the cash balance in hand, the balance amount is recorded in the debit side as "To balance b/d".