Cash Book
Introduction
Cash Book is a book of original entry (journal) as well as a book of final entry (ledger). It records all cash receipts and cash payments.
Types of Cash Book
1. Single Column Cash Book
Contains only one column for 'Amount' (Cash) on both sides. Records only Cash transactions. Discount transactions are recorded in Journal Proper.
2. Double Column Cash Book
Contains two columns on both sides:
- Cash and Discount Columns: Records cash and cash discount.
- Bank and Discount Columns: Records bank transactions and discount.
- Cash and Bank Columns: Most common. Records cash and bank transactions.
3. Triple Column Cash Book
Contains three columns on both sides: Cash, Bank, and Discount.
Contra Entry
A transaction that involves both Cash and Bank accounts is called a Contra Entry. It is recorded on both sides of the Cash Book (Double/Triple Column).
- Cash deposited into Bank (Bank Dr. to Cash Cr.)
- Cash withdrawn from Bank for Office Use (Cash Dr. to Bank Cr.)
Check for Contra entries is usually denoted by liability letter 'C' in L.F. column.
Petty Cash Book
Maintained to record small expenses like postage, stationery, cartage, etc., to relieve the main cashier from recording numerous small transactions.
Imprest System of Petty Cash
The Head Cashier gives a fixed sum (Float/Imprest) to the Petty Cashier at the beginning of a period. At the end, the Head Cashier reimburses the exact amount spent, restoring the balance to the original figure.
Treatments of Specific Transactions
- Cheque Received & Deposited Same Day: Recorded in Bank Column (Receipt side).
- Cheque Received but NOT Deposited Same Day: Recorded in Journal Proper as 'Cheques in Hand'. When deposited later, it becomes a Contra Entry (Bank Dr., Cash Cr. if treated as cash previously, or Journal entry). *Standard practice: Treat as Cash Receipt in Single Col or 'Cheques in Hand' account*.
- Cheque Dishonored: Credit Entry in Bank Column (By Customer A/c).
- Discount Allowed: Recorded on Debit side (Expense).
- Discount Received: Recorded on Credit side (Income).
- Bank Charges: Credit side Bank Column.
Balancing of Cash Book
- Cash Column: Always shows a Debit Balance (since cash paid cannot exceed cash in hand).
- Bank Column: Can show Debit Balance (Favorable) or Credit Balance (Overdraft).
- Discount Column: Never balanced. Only totaled. Total of Debit side = Discount Allowed Expense. Total of Credit side = Discount Received Income.
Numericals & PYQs
Part A: Numericals (10 Questions)
1. Debit side (Bank Col): To Cash A/c ₹2,000 (C).
2. Credit side (Cash Col): By Bank A/c ₹2,000 (C).
Office Use is Contra: Dr. Cash ₹5,000; Cr. Bank ₹5,000.
Personal Use is Drawings: Cr. Bank ₹1,000 (By Drawings A/c).
Debit Side:
To Ram A/c: Bank Col ₹9,500; Discount Col ₹500.
Credit Side (Bank Col): By Ram A/c ₹9,500.
Note: The discount allowed (₹500) must be cancelled via Journal Proper (Ram Dr. to Discount Allowed).
Total Cash Available = 100 + 900 = 1,000.
Closing Bal = 1,000 - 850 = ₹150.
Reimbursement needed next month = ₹850.
Credit Side:
By Rent A/c: Bank Col ₹5,000.
By Salary A/c: Cash Col ₹2,000.
List Price = 20,000. Less TD 10% = 18,000.
Cash Discount 5% on 18,000 = 900.
Cash Received = 17,100.
Debit Cash Col: ₹17,100. (Discount 900 not recorded in Single Col CB, but in Triple Col Disc Col).
Interest: Debit Side (Bank Col) To Interest A/c ₹200.
Charges: Credit Side (Bank Col) By Bank Charges A/c ₹50.
NO ENTRY in Cash Book.
It is a Journal Proper Entry: B Dr. to A.
Overdraft is Credit Bal. Deposit is Debit side.
New Overdraft = 10,000 - 2,000 = ₹8,000 (Cr.).
Part B: Previous Year Questions (PYQs) (10 Questions)
Journalized Ledger (Both Journal and Ledger).
Debit.
Two/Three Column Cash Book.
Imprest System.
Totaled but not Balanced.
Float or Imprest Amount.
Credit Transactions (e.g., Credit Purchase).
Bank Account.
Bank Column of Debit side.
Transactions not recorded in any other subsidiary book (e.g., Opening entries, Rectification entries).