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
Note
Key Characteristics:
- Records only cash and bank transactions (no credit transactions).
- Always shows a Debit balance (or zero) - you can't have negative cash.
- Posted on the Assets side of the Balance Sheet.
- Saves time (no need to post cash transactions to ledger separately).
- Maintained in columnar format (debit side = receipts, credit side = payments).
Types of Cash Book
1. Simple/Single Column
↓
2. Double Column
↓
3. Triple Column (Three Column)
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4. Petty Cash Book
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:
- Jan 1: Started business with cash ₹1,00,000
- Jan 5: Purchased goods for cash ₹30,000
- Jan 10: Sold goods for cash ₹50,000
- Jan 15: Paid salary ₹10,000
- 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:
- Jan 1: Cash in hand ₹50,000
- Jan 5: Received from debtor Ramesh ₹9,500 (allowed him ₹500 discount)
- Jan 10: Paid to creditor Mohan ₹7,800 (he allowed us ₹200 discount)
- 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
Test Your Knowledge
Question 1 of 5
1. Cash Book always shows a: