Cash Book

What is a Cash Book?

Cash Book is the one in which all the cash receipts and cash payments including the funds that are deposited in the bank and funds which are withdrawn from the bank are recorded according to the date of the transaction. All the transaction which is recorded in the cash book has the two sides i.e., debit and credit.

The difference between the sum of balances of the debit side and credit side shows the balance of the cash on hand or bank account. Cashbook plays a dual role as it is the book of the original entry of the company as well as book the final entry

Types of Cash Book Formats

There are three types of cash book formats which are the following:

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For eg:
Source: Cash Book (wallstreetmojo.com)

#1 – Single Column

Single column cash-book contains only the cash transactions done by the business. Single column cash-book has only a single money column on debit and credits both sides. It does not record the transaction-related, which involves banks or discounts. The transactions which are done on credit are not recorded while preparing the single column cash –book.

#2 – Double Column

Double column cash-book contains two money column both on the debit side as well as the credit side. One column is for the transactions related to the cash, and the other column is for the transactions related to the bank account of the business.  So, under double-column cash-book, not only cash transactions but transaction through the bank is done by the business is also recorded. The transactions which are done on credit are not recorded while preparing the double column cash –book.

#3 – Triple Column

It is also referred to as a three-column cash book format, and it is a most exhaustive form which has three columns of money on both receipt and payment sides and record transactions about the cash, bank, and discounts. This book is generally maintained by the large firms that do transactions in cash mode as well as through the bank and frequently allows and receives cash discountsCash DiscountsCash discounts are direct incentives and discounts provided by any company to their customers in exchange for paying their bills on time or before the due date. This is a common practice, and the discount may differ from one company to the next depending on the terms and conditions.read more.

Cash Book Format

Mr. X started the business in the month of June-2019. He invested the capital of $200,000, in which the cash contribution is $100,000, and the rest $100,000 he deposited in the business bank account a business.  During June 19, the following transactions took place in the business. Prepare the necessary double-column Cashbook using the data as given below:

Date	Transactions
1-Jun	Initial capital contributionInitial Capital ContributionContributed capital is the amount that shareholders have given to the company for buying their stake and is recorded in the books of accounts as the common stock and additional paid-in capital under the equity section of the company’s balance sheet.read more. Cash : $100,000 an Bank $100,000
2-Jun	Paid for Advertisement $ 500 from check
4-Jun	Raw material purchased from Mr. A of $ 10,000 by paying cash
4-Jun	Purchased stationery for cash worth $ 550
7-Jun	Raw material purchased from Mr. B of $ 20,000 on credit
9-Jun	Goods sold to the customer for $15,000 by cash
10-Jun	Paid $ 200 for the office expenses in cash
13-Jun	Goods sold on credit worth $ 11,000 to Mr. C
15-Jun	Received a check worth $ 11,000 for the goods sold on credit on 13-July-2019 to Mr. C;
18-Jul	Raw material purchased $ 10,000 by paying through check
21-Jun	Withdrew from bank $ 15,000 for business
25-Jun	Goods sold on credit worth $ 5,000
30-Jun	Paid rent by check of $ 7,500
30-Jun	Paid the salaries to staff of $ 17,000 in cash

Solution:

Advantages

• It helps in saving time and labor as in case of recording cash transactions in the journal, tremendous time and labor are required, whereas, in the case of cashbook, cash transactions are recorded straight away that is in the form of the ledger.
• Management can know the balances of cash and bank at any time. It helps in effective cash managementCash ManagementCash Management refers to the appropriate collection, handling, & disbursement of cash for ensuring financial stability & avoiding insolvency risk. read more.
• Cashbook is balanced regularly, which helps in avoiding fraud. Also, discrepancies, if any, arises can be found and rectified.

Important Points

• Cash-book plays a dual role as it is the book of the original entry of the company as well as book the final entry.
• It has two of the identical sides, i.e., left-hand side (debit side) and the right-hand side (credit side)
• The difference between the total of the two sides gives cash in hand or bank account balance.
• The transactions which are done on credit are not recorded in this book.

Conclusion

Cash-book is a separate book of accounts in which all the cash transactions of the company are entered concerning the corresponding date, and it is different from the cash account where posting is done from the journal. There is no requirement to transfer the balances to the general ledger, which is required in the case of the cash account. Entries are then posted to the corresponding general ledger.

Cash-book has two sides, i.e., the left-hand side and the right-hand side, where all the receipts in cash are recorded on the left side, whereas all the payments in cash are recorded on the right side. Cashbook helps in effective cash management as management can know the balances of cash and bank at any time and take the necessary decisions accordingly.

Recommended Articles

This article has been a guide to what is Cash Book and its definition. Here we discuss three types of cash book formats in accounting along with examples, advantages & limitations. You can learn more about accounting from the following articles –

• Petty Cash Book
• Examples of Bookkeeping
• QuickBooks Training Course
• Cash Receipt Format