CASH BOOK The cash book is merely the cash account removed from the ledger and bound in a separate book for the sake of convenience. Cash transactions are usually numerous in any business concern; it is therefore to secure efficiency in work that a separate book is used to record all cash transaction.

Cash book – a journal or ledger Cash book has a dual role : (journal) Journals are divided into various subsidiary books and cash book is one of those. All the entries are posted in the cash book first and ledger entries are posted there from.thus it act as a subsidiary to the ledger.

Continued…. Cash book as a ledger: It contain a condensed and classified record of all the transaction. The ruling of the cash book does not differ from that of ledger.

Advantage of maintaining a cash book It prevents duplication of work Both cash and bank transactions can be recorded in the cash book. Provides trader with the daily cash and bank balance

Types And Structures Of The Cash Book (single column cash book)

Rules for preparing a cash book Debit the cash book (cash column) by all the cash and cheques received, except: 1 Payment made direct to the bank, interest received by bank. 2 Cash and cheques paid into the bank on the same day as received.

Continued….. Debit all the cash book (bank column) with all the amount paid into the bank or received by the bank. Credit the cash book (cash column) with all payment in cash, and with any cheques received from the customer (debtors) and endorsed over to customers

Continued….. Credit the cash book (bank column) with : 1All payments by cheques drawn on the bank. 2All payment made by the bank on order to pay, other than by drawing of cheque.

Continued….. Contra entries ( i.e. payments from office cash to the bank and vice – versa, written as C in the folio column) 1payments from the office to the bank : when paying money out of the office cash book into the bank “ To Cash Rs….”, since bank balance increases, and credit the cash column “ By Bank Rs….”, since the cash gets reduced. 2 payments from the bank to the office : when drawing money from the bank for office purpose, debit the cash column “ To Bank Rs….”, since the office cash increases, and credit the bank column “By Cash Rs….”, since the bank balance gets reduced

Dishonored cheques: The balance in the bank is reduced by the amount of the dishonored cheque. The amount of the cheque must be entered into the bank column on the credit side of the cash book Thus, 10 th April, By K. Sen…., cheque dishonored Rs: 2500/- ( example) The corresponding entry will be shown on the K. Sen. A/C as he owes that amount.

Drawings by the proprietor Drawing are made by the proprietor of the firm. Drawing are made for personal use. Drawings are credited to the cash book and debited to the drawing account.

Bank loans and overdrafts Bank makes a loan, the amount of the loan must be debited in the bank column of the cash book, and be posted to the credit of a bank loan account, opened by the borrower in the general ledger. Interest is payable on the full amount of the loan whether used or not, this interest is credited to the bank in the bank column and debited to a bank interest account in the general ledger

Continued….. Overdraft means a person is allowed to withdraw money up to his stated limit for a limited period of time. The amount will appear as a credit balance in the bank column of the cash book. Interest charged by the bank will be treated in the same way as in bank’s loan interest

Illustration

Single column recording cash and bank transaction separately

Triple column cash book