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Cash Book - Part 1

"The Cash Book is unique—it's both a Journal and a Ledger."

The Cash Book is the most important subsidiary book. Every business handles cash daily, and the Cash Book provides a complete record of all cash receipts and payments.

What is a Cash Book?

Definition: A specialized book where all cash and bank transactions are recorded chronologically.

Dual Role:

  • Book of Original Entry (Journal): Transactions are first recorded here.
  • Ledger Account: It serves as the Cash Account itself (no separate Cash A/c in the ledger).

Features of Cash Book

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Types of Cash Book

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1. Simple (Single Column) Cash Book

Purpose: Records only cash receipts and cash payments.

Format

Dr.                     Cash Book                      Cr.
------------------------------------------------------------
Date | Particulars | L.F. | Amount | Date | Particulars | L.F. | Amount
-----|-------------|------|--------|------|-------------|------|-------
Jan 1| To Capital  |      | 50,000 |Jan 5 | By Rent     |      | 10,000
Jan 3| To Sales    |      | 20,000 |Jan 8 | By Salary   |      | 15,000
     |             |      |        |      | By Balance c/d|    | 45,000
-----|-------------|------|--------|------|-------------|------|-------
     | Total       |      | 70,000 |      | Total       |      | 70,000
==================================================================
Jan 9| To Balance b/d|    | 45,000 |      |             |      |

Key Points:

  • Debit Side (Left): Cash received (inflow).
  • Credit Side (Right): Cash paid (outflow).
  • Balance c/d (carried down): Closing balance (always on credit side).
  • Balance b/d (brought down): Opening balance for next period (debit side).

Example: Simple Cash Book

Transactions:

  1. Jan 1: Started business with cash ₹1,00,000
  2. Jan 5: Purchased goods for cash ₹30,000
  3. Jan 10: Sold goods for cash ₹50,000
  4. Jan 15: Paid salary ₹10,000
  5. Jan 20: Paid rent ₹5,000

Cash Book:

Dr.                     Cash Book                      Cr.
------------------------------------------------------------
Date | Particulars     | Amount | Date | Particulars | Amount
-----|----------------|--------|------|-------------|-------
Jan 1| To Capital      |1,00,000|Jan 5 | By Purchases| 30,000
Jan10| To Sales        | 50,000 |Jan 15| By Salary   | 10,000
     |                |        |Jan 20| By Rent     |  5,000
     |                |        |Jan 31| By Bal c/d  |1,05,000
-----|----------------|--------|------|-------------|-------
     | Total          |1,50,000|      | Total       |1,50,000
==================================================================
Feb 1| To Bal b/d      |1,05,000|      |             |

2. Double Column Cash Book

Purpose: Records cash transactions plus discounts (allowed and received).

Additional Columns:

  • Discount Allowed: Discount given to debtors (when they pay early).
  • Discount Received: Discount received from creditors (when we pay early).

Format

Dr.                     Cash Book                      Cr.
----------------------------------------------------------------
Date|Particulars|L.F.|Disc|Cash||Date|Particulars|L.F.|Disc|Cash
----|-----------|----|----|----||----|-----------|----|----|----|
Jan2|To Debtor A|    | 500|9,500||Jan5|By CreditM|    | 200|7,800
    |           |    |    |    ||    |By Bal c/d |    |    |1,700
----|-----------|----|----|----||----|-----------|----|----|----|
    |Total      |    | 500|9,500||    |Total      |    | 200|9,500

Important:

  • Discount columns are NOT totaled with cash columns (they're separate).
  • Discount Allowed (Debit side) = Expense (Dr. Discount Allowed A/c).
  • Discount Received (Credit side) = Income (Cr. Discount Received A/c).

Example: Double Column Cash Book

Transactions:

  1. Jan 1: Cash in hand ₹50,000
  2. Jan 5: Received from debtor Ramesh ₹9,500 (allowed him ₹500 discount)
  3. Jan 10: Paid to creditor Mohan ₹7,800 (he allowed us ₹200 discount)
  4. Jan 15: Cash sales ₹20,000

Cash Book:

Dr.                     Cash Book                      Cr.
----------------------------------------------------------------
Date|Particulars |L.F.|Disc.|Cash  ||Date|Particulars|L.F.|Disc.|Cash
----|------------|----|----|------||----|-----------|----|-----|-----
Jan1|To Bal b/d  |    |    |50,000||Jan10|By Mohan  |    | 200 |7,800
Jan5|To Ramesh   |    | 500| 9,500||    |By Bal c/d |    |     |71,700
Jan15|To Sales   |    |    |20,000||    |           |    |     |
----|------------|----|----|------||----|-----------|----|-----|-----
    |Total       |    | 500|79,500||    |Total      |    | 200 |79,500
==================================================================
Jan16|To Bal b/d |    |    |71,700||    |           |    |     |

Posting to Ledger:

  • Debit Discount Allowed A/c with ₹500
  • Credit Discount Received A/c with ₹200

Contra Entries

"Transactions that appear on BOTH sides of the Cash Book."

Examples:

  • Cash withdrawn from bank for office use.
  • Cash deposited into bank.

Marking: Write "C" in the L.F. column to indicate it's a contra entry (no ledger posting needed as both sides are in Cash Book itself).

Example:

Dr.                     Cash Book                      Cr.
----------------------------------------------------------------
     |To Bank A/c  | C  |    |10,000||By Cash A/c   | C  |    |10,000
(Cash withdrawn from bank)

Real-World Example

A Retail Shop's Daily Cash Book

  • Morning: ₹20,000 cash in hand
  • Sold goods for ₹15,000 cash
  • Paid electricity bill ₹2,000
  • Received payment from customer who owed ₹5,000 (gave ₹100 discount)
  • Paid supplier ₹8,000 (got ₹200 discount)

Closing Balance:

Opening: ₹20,000
+ Sales: ₹15,000
+ From customer: ₹4,900 (₹5,000 - ₹100 discount)
- Electricity: ₹2,000
- To supplier: ₹7,800 (₹8,000 - ₹200 discount)
= Closing: ₹30,100

Quiz: Cash Book - Part 1

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