Cash Book (Definition, Types) | Accounting Format of 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in which all the cash receipts and cash payments including the funds that are deposited in the bank and funds which are withdrawn from the bank are recorded according to the date of the transaction.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. 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

Types of Cash Book Formats

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

#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.

Popular Course in this category

All in One Financial Analyst Bundle (250+ Courses, 40+ Projects)4.9 (1,067 ratings) 250+ Courses | 40+ Projects | 1000+ Hours | Full Lifetime Access | Certificate of Completion

View Course

#2 – Double Column

Double column cash-book contains has 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 as three-column cash book format and it is most exhaustive form which has three columns of money on both receipt and payment sides and record transactions pertaining to the cash, bank and the discounts. This book is maintained generally by the large firms that do transactions in cash mode as well as through the bank and frequently allows and receives cash discounts.

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 rest $100,000 he deposited in the business bank account a business. During the month of June 19, the following transactions took place in the business. Prepare the necessary double-column Cash book using the data as given below:

Date		Transactions
1-Jun		Initial capital contribution. 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, huge time and labor are required whereas, in case of cashbook, cash transactions are recorded straight away that is in form of the ledger.
Management can know the balances of cash and bank at any time. It helps in effective cash management.
Cashbook is balanced regularly which helps in avoiding frauds. Also, discrepancies if any arises can be found and rectified.

Limitations

It may take a lot of time for starting and maintaining this book.
In the case of the large organization, maintaining it involves large costs.

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 with respect to 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 case of the cash account. Entries are then posted to the corresponding general ledger.

Cash book has two sides i.e., 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 right side. Cash book helps in effective cash management as management can know the balances of cash and bank at any time and take the necessary decisions accordingly.