Cash Book

Updated on January 3, 2024
Article byWallstreetmojo Team
Edited byAnkush Jain
Reviewed byDheeraj Vaidya, CFA, FRM

What is Cash Book?

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Book is the one in which all the cash receipts and cash payments, including the funds deposited in the bank and funds withdrawn from the bank, are recorded according to the date of the transaction.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

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

Cash Book Explained

The cash book is a separate book of accounts in which all the company’s cash transactions 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 accounting 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. Therefore, cash book helps in effective cash management as management can know the balances of cash and bank and take the necessary decisions accordingly.

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Types

Among the different types of maintaining a petty cash book or a full-fledged one, the three types are as discussed below.

Types of Cash Book

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#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 on both sides. It does not record the transaction-related, which involves banks or discounts. The transactions done on credit are not recorded while preparing the single-column cash–book.

#2 – Double Column

The double-column cash book contains two money columns both on the debit and the credit sides. One column is for the transactions related to the cash, and the other column is for the transactions related to the business’s bank account. So, under the double-column cash book, the business also records cash transactions and transactions through the bank. But on the other hand, the transactions 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 complete form with three columns of money on both receipt and payment sides and records transactions about the cash, bank, and discounts. This book is generally maintained by the large firms that do transactions in cash mode and through the bank and frequently allow and receive 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.

Format

Let us understand the format of maintaining a petty cash book or a detailed cash book through the detailed explanation below.

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

DateTransactions
1-JunInitial 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-JunPaid for Advertisement $ 500 from check
4-JunRaw material purchased from Mr. A of $ 10,000 by paying cash
4-JunPurchased stationery for cash worth $ 550
7-JunRaw material purchased from Mr. B of $ 20,000 on credit
9-JunGoods sold to the customer for $15,000 by cash
10-JunPaid $ 200 for the office expenses in cash
13-JunGoods sold on credit worth $ 11,000 to Mr. C
15-JunReceived a check worth $ 11,000 for the goods sold on credit on 13-July-2019 to Mr. C;
18-JulRaw material purchased $ 10,000 by paying through check
21-JunWithdrew from bank $ 15,000 for business
25-JunGoods sold on credit worth $ 5,000
30-Jun Paid rent by check of $ 7,500
30-JunPaid the salaries to staff of $ 17,000 in cash

Solution:

double column Cashbook entry

Importance

Despite being difficult to maintain on a large scale, organizations ensure maintaining cash book accounting for a handful of reasons. Few of which are as discussed below.

  • Cash-book plays a dual role as it is the book of the company’s original entry and the final entry.
  • It has two the identical sides, i.e., the 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.

Advantages & Disadvantages

Let us understand the advantages and disadvantages of cash book accounting through the points below.

Advantages

Disadvantages

  1. It may take a lot of time to start and maintain this book.
  2. In the case of a large organization, maintaining it involves high costs

Recommended Articles

This article has guided to what is Cash Book. Here we explain its format, three types, advantages, and disadvantages in detail. You can learn more about accounting from the following articles –

Reader Interactions

Comments

  1. Mankaa quinavel says

    Thank for helping me out. I appericate

  2. Richard wans says

    thank you so much, i am now reminded
    i have just got job after many years after my graduation in account and finance, i had forgotten a lot

  3. Mr Adebayo Sunday from Nigeria says

    Thanks very well because I can refresh my brain with this now.

  4. Vincent says

    Nice ,,indeed educative

  5. Tumwesigye Dickson says

    I have spent a good time reading such vital information and it has helped me to pass my exams for Financial Accounting.
    This has also helped me to come up with different skills in different fields. Thank you for your help and I hope everyone is having a great life like me. There is no regret . Thank you once again.

  6. Joseph Marachi says

    Thank you so much for your basics, am now equiped with basic knowledge.

  7. Annah Mandizha says

    This has sharpened my knowledge and it is very clear and understandable

  8. CJ says

    Thanks a million Sir, I’m filled with joy by your explanations. And i would like to know more
    on accounting so I can start solving it in any form account question appear. Once again, thank you so much .God bless you Sir. How I want my name to appear is CJ only without my email Sir.

  9. Musanganya Jean marie vianney says

    thanks for this topic

  10. yohanna ishaya says

    thank you so much for your maximum effort and time i really learn a lot on the cash book

  11. Boitshwarelo somolekae says

    Thanks a lot ,but I will always search some other information

  12. Mohammad Hassan Afghan says

    With deu respect dear sir I strongly need it please teach me .
    Thanks

  13. Bujiku Lunyela mashamba says

    Thanks for preparing good notice of cash book

  14. Witness robert says

    Questions

  15. George Deogras says

    I like to join because you have a good lessons

  16. ANGE says

    THANK FOR EVERYTHINK THEN THE TRIPLE COLUMN MEANS WHAT AND THE FORMAT AND EXAMPLE. THANK YOU

  17. Paul isack misalaba says

    Very useful materials since it require brain fully understanding and concentrations on financial matters.

  18. Eddie says

    Very precise and brilliant work done.
    Thansk to the management

  19. jabir sarki says

    really appreciate the topic. thank you sir.

  20. Dennis Allety says

    i have greatly appreciated

  21. Kathryn says

    It was so very helpful thanks

  22. Rachael Noel says

    Helped me a lot

  23. Favour Ighotemurue Ebruwiyor. says

    This page can help on everything concerning cashbook and the Petty types of petty cashbook. Even important points , conclusion and full things concerning the types of cashbook.

  24. Favour says

    This page is good, important and helpful.

  25. khan zaman says

    this is very great

  26. James Tuman Ruben says

    Thanks so much for your immeasureable effort and time that you have put through on the bookkeeping and the cash book… As now i know the basics of bookkeeping already and that is through you. So,now i can maintain my transactions records of my Backyard Piggery business.

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