LECTURE 2:

BY: Ms. Pakeezah Butt.

CASH
BOOK
Learning Objectives:
To explain the meaning of Cash Book
To discuss the types of cash book
To enter the transactions in Cash Book

(all formats)
To describe the meaning and need of
Petty Cash Book
To prepare the Petty Cash Book

Introduction

As the business grows, the number of

transactions increases.
Recording all the transactions only in the

Journal becomes very inconvenient, bulky and

may cause delay in collecting information
required. It needs to be divided into many
books.
Journal is subdivided in such a way that a

There are various kinds of books that are

maintained where the transactions will be recorded

in these books according to their nature such as
Cash book for cash transactions
Sales Book for credit sales
Purchases Book for credit Purchases
Purchases return book for all returns of goods

purchased on credit
Sales return book for all returns of goods sold on
credit
Bills receivable book for all note received from
debtors
Bills payable book for all bills payable to creditors

Cash Book
Cash Book is a Book in which all

cash

receipts

(cash received) and cash

payments (cash paid) are recorded.
When a cash book is maintained, no separate cash

ledger is required as Cash Book serves the purpose

of Cash Account.
Cash Book plays a significant role because it

records large number of cash items of a business

concern.

Difference between Cash Ledger

&Cash Book
Cash Book

Cash Account

Subsidiary book for cash

transaction (Journal is
subdivided in to such a way
that a separate book is used
for each category of
transactions).
Books of original entry

(records entries directly from

transaction).
When cash transaction are

recorded in cash book there is

no necessity to open a cash
account in ledger.

It is an account in ledger.

Cash account is opened in

the ledger in which posting

is done from some book of
original entry (journal).
When account is opened in

journal, it is necessary to
open account is ledger.

TYPES OF CASH BOOK

Cash book can be of four types:

1.
2.
3.
4.

Simple (single column) Cash Book

Two (double) column cash book
Three (triple) column cash book
Petty cash book

Simple Cash Book (single column)

A simple cash book is prepared like any

ordinary account.
It records only cash receipts and cash payments.
It has two sides, namely debit and credit.
Cash account is an asset account, so the rule
followed is Increase in assets to be debited and
Decrease in asset is to be credited.
Cash receipts are recorded on the debit side i.e.
left hand side and cash payments are recorded on
the credit side i.e. right hand side.
It is also known as single column cash book as
there is only one amount column on its debit side
and on the credit side.

Explanation
Date
In this column Year, Month and Date of transactions are
recorded in chronological order.

Particulars
In this column, the name of the account in respect of which cash
has been received or payment has been made is written.

Ledger Folio
In this column, it records the page number of the ledger book on
which relevant account is prepared.

Amount
In this column, it records the amount received on debit side and
cash paid on its credit side.

At the end of the month, cash book is balanced in the same

manner an account is balanced in the ledger.

The total of the debit side of the cash book is compared with

the total of the credit side and the difference if any is entered
as balance c/d.
In case of Simple Cash Book, the total of debit side is always

more than the total of the credit side, since the payment can
never exceed the available cash. The difference is written in
the amount column and total of the both sides of the cash
book becomes equal.
The closing balance of the credit side becomes the opening

balance for the next period and is written as Balance b/d on

the Debit side of the Cash Book for the next period.

ILLUSTRATION 1
Enter the following transactions in the cash book of M/s. Rohan

Traders
Date
1. December
2. December
3. December
4. December
5. December
6. December
26,000
7. December
8. December
9. December
10. December
11. December
12. December

01,
05,
08,
10,
14,
18,

Details
2005
2005
2005
2005
2005
2005

Amount (Rs.)
Cash in Hand
27,500
Cash received from A
12,000
Insurance Premium paid 2,000
Furniture purchased for cash6,000
Sold Goods for cash
16,500
Purchased Goods for cash from B

22,
25,
27,
28,
29,
30,

2005
2005
2005
2005
2005
2005

Cash paid to C
3,200
Sold Goods to D for cash
18,700
Purchased goods on credit 15,00
Cash Deposited into Bank 5,000
Purchased building from E 100,000
Rent paid
4,000

ILLUSTRATION 2
Prepare Cash Book for the month of April 2006 from the following

particulars :

Date
2013

Details

1. April 01
2. April 03
3. April 06
4. April 10
5. April 15
6. April 17
7. April 19
8. April 21
9. April 25
10. April 28
11. April 30

Amount (Rs.)

Cash in hand 17,600

Purchased Goods for cash from A 7,500
Sold Goods to B
6,000
Wages paid in cash 500
Cash paid to C 3,500
Cash Sales 10,000
Commission paid 700
Cash received from D
1,500
Furniture Purchased for cash 1,700
Rent paid 3,000
Paid Electricity bill in cash 1,300

Double (TWO) Column Cash Book

A two column cash book along with the cash payments and

cash receipts, also records:

Discount Allowed

(concession given by the

businessman to its customers or debtors)

Discount Received

(concession received by the

businessman from the creditors)

Discount Allowed is a type of loss for the business so it is to

be debited and recorded in Dr. Side of the cash book.

Discount received is the is a gain or profit for the firm so it

is to be credited and recorded in the Cr. side of the cash

book.

Note:
Discount columns are not balanced they are only
totaled.

ILLUSTRATION 1
2005
Rs.
Jan 1
Cash in hand
15,000
Jan 5
Paid to A 3,000
Discount allowed by him 100
Jan 6
Purchased goods for cash 4,000
Jan 10 Received from B 9,800

Discount allowed 200

Jan 11 Sold goods 4,000
Jan 12 Paid to C 2,950
Discount received 50
Jan 13 Paid wages 500
Jan 14 Paid to D in full settlement of his
Account which shows a Cr. Balance of Rs. 4000
3900

ILLUSTRATION 2
X started business on 1.4.2005 with Rs. 20,000
as Capital. He had following cash transactions
in the month of April 2005.

Triple (THREE) Column Cash Book

A three column cash Book is a cash book
which contains bank column along with cash
and discount columns.
Instead of having a separate book to record
bank transactions, a column is added on each
side.
All deposits/payments into bank are recorded
on the debit side and all withdrawals/payments
through the bank are recorded on the credit
side of the cash book.

Balancing of Bank Column

Note:
In usual case, the deposits or payments into the bank will
exceed the withdrawals or payments out of the bank that s
why the total of debit side is always more than the total of
the credit side. The difference is written in the amount
column and total of the both sides of the bank column
becomes equal. The closing balance of the credit side
becomes the opening balance for the next period and is
written as Balance b/d on the Debit side of the Cash Book
for the next period.
It is possible, however, that the bank may allow to withdraw
more than the amount deposited, i.e. to have an overdraft.
In such a case the total of the bank column on the credit
side will be bigger than the one on the debit side. The

Preparation of Bank column cash

book
There are some special business transactions

which need special treatment in the Bank

column of the Cash Book:
(i) Opening balance
(ii) Receipt of cheques
(iii) Contra entries
(iv) Endorsement of cheque
(v) Bank charges

(i) Opening Balance

The opening bank balances are recorded on the
debit side of the cash book. If it is a Bank
overdraft, it is written on the credit side of the
bank column of the cash book as opening
balance.
(ii) Receipt of Cheques
If the cheques received and deposited in bank on
the same date, it is entered on the debit side of
bank column.
If the cheques received are not deposited in the
bank on same day, they are considered as cash
and written on the debit side in the cash column.

(iii) Contra entries

When there is a transaction that relates to both cash and
bank, this will be written on one side of Bank Column
and on other side of Cash Column, Such transactions
are known as Contra entries.
In case cash is withdrawn from bank, it is entered on

the credit side of bank column and also in the debit

side of cash column of the cash Book.
In case cash is deposited in the bank, the amount is
recorded on the debit side of bank column and on the
credit side of cash column of the cash book.
The letter C is written in the LF column on both sides
against these entries.

(iv) Endorsement of Cheque

On receipt, it is recorded on the debit side of
cash column.
On endorsement of cheque, the amount is
recorded on the credit side of the cash
column.
(v) Bank Charges
If bank charges any interest, service charges
etc. are entered on the credit side of the
Bank column.
Similarly, if bank gives interest, collects

ILLUSTRATION 1

Record the following transactions in the triple column Cash

Book
Date
Details
Amount (Rs.)
01 Jan 2010 Bank Balance
32,500
01
Cash Balance
12,300
03
Purchased Goods by cheque
5,300
...
Discount received
200
08
Goods Sold for cash
9,500

Discount Allowed
500
10
Purchased Typewriter by Cheque
5,400
15
Sold Goods and received Cheque
7,900
(deposited on the same day)
17
Purchased Stationery by Cheque
1,000
20
Cash deposited into bank
10,000
22
Paid Cartage
500
24
Cheque given to Mudit
7,000
28
Rent paid by Cheque
3,000

ILLUSTRATION 2
Prepare Bank Column Cash Book from the following information:
Date
1 Dec
1
4
6
9
13
..
15
18
22
25
27
29
31
..

Details
Amount (Rs.)
2009 Cash in hand
10,500
Bank Overdraft
9,500
Paid Wages
400
Cash Sales
10,000
Cash deposited into Bank
5,000
Purchased Goods and paid by cheque
6,000
Discount received
1000
Cash deposited into Bank
4,000
Paid Trade Expenses by cheque
1,200
Rent paid
2,300
Received Cash from Rahul
1,500
Commission paid
2,000
Salary paid
3,500
Bought Goods by Cheque
3,000
Discount received
200

PETTY CASH BOOK

Small payments are made for conveyance, postage,

telephone, courier and other expenses. If all these

transactions are recorded in cash book, it may become
bulky and the main cashiers work will also increase.
Businesses appoint a petty cashier who makes these small
payments and keep record of these payments in a
separate cash book called as Petty Cash book.
He is given a sum of money in the beginning of
period.
During the period he makes payment out of this
money.
At end of the period the firm repay the amount paid by
him so that the balance of cash with remains same in the
beginning of the period as well as at the end of the period.

FORMAT OF PETTY CASH BOOK

Amoun Dat
t
e
receiv
ed

Particul
ars

Vouche
r no.

Amou
nt
paid

Analysis of payments
Conv
eyan
ce

Posta
ge

Statio Misce
nary
llane
ous

ILLUSTRATION 1

ILLUSTRATION 2

THANK YOU