types of cash book: What is Cash Book Meaning, Types, and Cash Book Format

types of cash book books are of three types – single column, double column, triple column. The balance of the cash book is included in the trial balance like a regular ledger account. It also acts as a part of the ledger because it contains cash and bank accounts. At the same time, it is also a ledger since purely cash transactions are posted in it .

Petty cash book helps to keep the main cash book in a compact form because numerous entries for small and petty items are recorded in the petty cash book itself. Petty cash book is a kind of cash book which records large number of small payments such as conveyance, cartage, postage, telegrams and other expenses under the imprest system. The procedure becomes cumbersome if all small and repetitive payments are handled by the main cashier and are recorded in the main cash book. We know that cash book is also a cash account and there are two approaches for recording business transactions in the books of accounts. One is ‘Traditional Approach’ and the other is ‘Equation Based Approach. For recording transactions in the simple cash book, the foremost step is to understand the rule for recording transactions i.e., which account is to be debited and which account is to be credited.

What is the difference between a cash book and a cash statement?

Columnar petty cash books consist of many money columns which record daily expenditures. This Petty Cash Book has two sides – the debit side and the credit side. The first three columns are the same as the single column cashbook and show the date, transaction description (Desc.), and ledger folio reference . The two columns referred to in the name of this cashbook are the monetary amount of the cash receipt , and the monetary amount of the discount allowed both highlighted in gray.

Companies maintain two types of Petty Cash Book for all cash transactions of a business. The cash book containing three money columns on both sides is called a treble column cash book. Like a ledger account, the cash book consists of two sides – the debit side and the credit side if prepared in ‘T’ format. All the receipts are recorded on the receipt sides, and all cash disbursements are recorded on the payment side of the cash book. An original entry in a cash book is a record of a financial transaction. The bank cash book is a type of cash book that is used to track the transactions between a business and its bank.

It is essential for businesses to keep track of their finances to comply with the law. Chaitra-4 Purchased goods for Rs 100,000 from Achala and paid her partially by cheque of Rs 80,000. January-18 Paid salary of Rs 10,000 by cheque and wages of Rs 2,000 in cash. January-8 Sold goods to Mr. Sanjay for Rs 30,000 and received a cheque of Rs 25,000 partially.

Legal requirements to use cash books

This data is then utilised for the preparation of the company’s financial statements. As the double entry is complete for such transactions in the Cash Book itself, no further posting is required in the ledger. The total debt discount column and the total credit discount column are treated as separate balances.

The cash book is called a ledger because of its above-mentioned characteristics. Cash book is both journal and ledger as it contains all journal and ledger features and serves purposes of both. The format of the cash book is similar to that of a ledger account. After the transactions, these are recorded in the cash book in chronological order of dates with explanations like a journal.

The cash book serves the purpose of the journal and ledger. Among the financial transactions of concern, cash transactions carry much more importance. All of this information is very important for accounting and tax records. It is essential for businesses to keep track of their finances in order to stay compliant with the law. After doing that, the next step you will need to shift into the debit side and list out cash receipt transactions. On the credit side, however, debit transactions are reflected as deductions and are exponentially updated as your list builds up.

The bank account maintained by the enterprise is a personal account and the cash account is a real account. For recording transactions in the bank column of the cash book the rule of debit and credit applicable to personal accounts should be followed i.e. debit the receiver and credit the giver. Thus, when cash is deposited with bank, the bank would be the receiver and would be debited in the bank column of the cash book.

Cash Book | Class 11 Accountancy (Notes & Exercises)

Like an account is balanced in the ledger, the cash book is balanced in the same way. Depending upon the need and size of the enterprise, the cash book should be balanced daily, weekly or monthly. Consequently, this cash book has given rise to the concept of contra entries, commonly denoted as ‘C’ in the cash book.

It records the cash transactions and works as a book of original entries and ledger. Let’s look into the different types of general cash books. This is the simplest form of Cash Book and is used in businesses where payments are made and received mostly in cash and where usually no cash discount is received or given. However, if there are any discount or cheque transactions, it is recorded in a separate account in the ledger. The ruling of a Simple Cash Book is like an ordinary cash account.

In order to make the clerical work more easier a sub-division of Journals are made. Sub-division of journal into various books for recording the transaction of similar nature are called as subsidiary books. The cash book is the most important subsidiary book of any business concern. It records the daily transactions relating to receipts and payment of cash. A cash book has two sides, a receipt side or debit side and a payment side or credit side.

In order to complete recording of other aspect of a cash transaction, only one sided posting is required to be made from the cash book. Payments are recorded in credit side and receipts are recorded in the debit side. In other words, a cash book records all transactions of cash receipts and disbursements . Cash book is divided into two parts namely, cash payments and cash receipts. A cash book contains receipts and payments of cash, credit sales, etc.

The https://1investing.in/ book is also regularly reconciled with the bank statements as an internal auditing measure. A simple column cash book purely records cash transactions and is a substitute for cash related journal entries and cash account. Some organizations keep cash books rather than cash receipts & disbursements payments diaries.

“How to use a cash book in accounting.” Accessed Aug. 27, 2021. Similarly, when the company purchased goods from the supplier, they have to collect cash memo from the customers and to be filed separately. Cash memo reference to be mentioned in the Payment Voucher. The folio of cash book are written in the ledger and the folio of ledger are mentioned in the cash book for cross reference. You can transfer money from your passbook account by visiting the bank and requesting a transfer, or by using online banking or mobile banking services.

As for small expenditures such as stationary, bus fares, cleaning, casual labour, etc., writing checks is unreasonable. So, in order to keep track of these daily transactions, a petty cash book was introduced. It’s a book that keeps track of every small expenditure of the company cash. The funds used for small payments are known as petty cash and the person whose job is to make and record those payments is known as a petty cashier. In most cases, it’s a ledger book and not a computer record. It’s a collection of accounts that record account transactions.

• Bank account is opened separately for bank transactions, if any.
• A cash flow statement is viewed as a chequing account for several reasons.
• It also acts as a part of the ledger because it contains cash and bank accounts.
• CA knowledge offers Net Worth, taxation, Banking & financial solutions to individuals, businesses, and organizations all over the world.

Receipts are recorded in one amount column on the receipts side known as ‘Amount Received’ column. However, for recording receipts and payments the column for date, voucher number and particulars are common. For recording petty expenses, petty cash book has one column on the payment side which is known as ‘Total Amount’ column.

He has worked as an accountant and consultant for more than 25 years and has built financial models for all types of industries. He has been the CFO or controller of both small and medium sized companies and has run small businesses of his own. He has been a manager and an auditor with Deloitte, a big 4 accountancy firm, and holds a degree from Loughborough University. Irrespective of the number of sub-divisions, each page of the cash book can have a number of formats from single column to multi-column.