What is a Cash Book?

Cash Book serves dual role of a ledger as well as journal.

Cash book is the account which keeps track of all the cash transactions of the business. It is a part of Ledger.

Because of the enormously large amount of cash transactions in a typical business, this Cash Account is maintained as a separate book known as CASH BOOK. Cash book is also a book of original entry. Cash book consists of Cash Account and Bank Account.

• Cash Account is an Asset account or Real Account and thus,
• Any increase in Cash or Bank Account is debited to the account and;
• Any decrease in Cash or Bank account is credited to the account.
• Cash Book always shows a debit balance.

Types of Cash Book

Single Column

Double Column

Triple Column

Petty Cash Book

Contra Entries

These entries are made to record:

When money is withdrawn from the bank for office use:

It is recorded in cash column on its debit side by writing ‘Bank account’ in the column of particulars and in bank column of the same cash book but on its credit side by writing ‘Cash account’ in the column of particulars.

When money is taken from Office cash and deposited into bank:

When cash is deposited into bank, it is recorded in the bank column of the cash book on its debit side by writing ‘Cash account’ in the column of particulars and in the cash column of the same cash book but on its credit side by writing ‘Bank account’ in the column of particulars.

Two entries are made in the Cash Book on the same page at the same time. The double entry for each transaction is complete. There will be no more postings of these entries to the ledger and these contra entries are indicated by a sign “c” in the folio column.

Cash discount

A cash discount is a deduction from the amount due. It is given to encourage prompt payment of debts. Cash discount which is given by the trader to its customers is known as Discount allowed. Cash discount is allowed to the customers to encourage prompt payment of their debts. Discount allowed is recorded in the discount column on the debit side of the triple column Cash Book and posted individually to the credit side of the debtors accounts to which they relate.
Cash discount received by the trader from its supplier is known as Discount received. The trader ends up paying less by the amount of discount received. Discount received is recorded in the discount column on the credit side of the triple column Cash Book and posted individually to the debit side of the creditors accounts to which they relate.