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A cash book is a subsidiary book that includes both cash and bank transactions, and it is a journal and a ledger. Some companies utilize cash books instead of cash receipts journals and cash payments journals. Since all cash receipts and payments are recorded in cash books, it is easier to access information. When a cash book is maintained separately, there is no reason to keep a cash account in the ledger. For all purposes, a cash book is treated like a cash account (a part of the ledger). Cash books can function as a journal or book of prime entry since all transactions are recorded as and when they occur. It also acts as part of the ledger because it has cash and bank accounts.

A cash book includes receipts and payments of cash, credit sales, and more. It shows the date of a transaction, the name of the customer (if applicable), account to be debited (positive amount) or credited (negative amount). The balance is placed in the ledger as a cash account by the end of the day. Cash books are crucial since they are used to document all cash receipts and payments. It has debits and credits, which are double-entry bookkeeping entries. Debits represent increases in value or asset accounts. On the other hand, credits show decreases in value or liability accounts. 

What is a Cash Book? 

The cash book is a separate ledger that contains all cash receipts and cash payment transactions. It is listed in chronological order, and the balance is updated and verified continuously. Larger organizations tend to divide cash books into two parts (the cash disbursement journal and the cash receipts journal). Information in cash books is regularly compared to the bank’s records via a bank reconciliation to guarantee the information in the book is correct. If the information is incorrect, an adjusting entry is made to bring the cash book in alliance with the bank’s information. There are three common types of cash books: single-column, double-column, and triple-column. 

What are the components of a Cash Book? 

Cash books resemble the format of ledger accounts and are used to record receipts and payment transactions. Ledger accounts are divided into two parts (the right-hand and left-hand side) to display information. Each cash book contains certain components relevant to identifying transactions and maintaining records.

The following components are included in cash books.

  • Date: The date is the first column of cash books, and the dates of transactions are in this place. 
  • Particulars: Particulars is the second heading after the date. The description for the corresponding transaction type is placed under this heading. For instance, someone will write “sale” under the applicable column to record a cash sales transaction.
  • Voucher Number: For cash and receipt payments, organizations hand out cash receipts or vouchers. The receipts and vouchers are numbered and documented in the cash book for reference. 
  • Ledger Folio Number: Accounts in particular columns have separate ledgers. The ledger folio number is the specific number of a certain account, and knowing the ledger number helps people cross-reference easier. 
  • Cash Column: The cash column notes the amounts on cash receipts and cash payments. 
  • Bank Column: A bank column is a part of double and triple-column cash books. In these files, cash and bank transactions are documented. 
  • Discount Column: The discount column is the third column in the triple-column cash book. It is a section for listing discounts received and given. 

Where is the Cash Book entry posted? 

The cash book entry is posted in the general ledger. A cash book is a separate collection of accounts in which all of the company’s cash transactions are entered based on corresponding dates. It differs from the cash account, which is done in the journal. There is no requirement to transfer balances to the general ledger, but it is required for cash accounts. Cash books have two sides (left-hand side and right-hand side) where all receipts in cash are recorded on the left side, and all payments in cash are recorded on the right side. Cash books assist with effective cash management.

How is the recording of a Cash Book done? 

All transactions in a cash book have two sides (debit and credit). Cash receipts are recorded on the left side as a debit, while cash payments are on the right side as a credit by date. There are three types of cash books to use, and a single column is the simplest one. It will have four headers: (date, description, reference (“folio number”), and amount. They are on the left and right sides, showing receipts and payments for each respectable column. The date column is the date of a transaction.

How to balance a Cash Book? 

Most business owners today use accounting software to maintain books. However, knowing how to balance a cash book is still beneficial. The software records all transactions as they occur (debits and credits) and runs reports of what is outstanding. Understanding how that process works with a cash book can help business owners ensure the accuracy of cash transactions. Cash books contain all cash receipts and payments and bank deposits and withdrawals.

You can balance a cash book by following the steps below.

  1. First, obtain a bank balance confirmation. You can reconcile books and statements with reconciliation forms. They can be downloaded online, or you can use a sheet of paper with your books’ values in the left column and the bank statement and your cash books should be the same. 
  2. Second, add deposits. Cash deposits are generally recorded immediately. But, there can be delays if cash deposits in your records are not posted on the bank statement. Always consider this when dealing with cash deposits. 
  3. Third, consider other transactions for fees and penalties. Many business owners find that their cash books are off since they did not take the time to deduct bank fees and penalties. Subtract these from your books based on information provided by the bank.
  4. Fourth, revise for errors. If all transactions are properly accounted for, the ending balances of the cash book and statement should be the same. If this is not the case, go through each deposit to ensure it was for the correct amount. Sometimes discrepancies mean that someone is fraudulently changing the deposit amount.

What are the types of Cash Books? 

Cash books are separate ledgers that record cash transactions. They serve as a general ledger and a journal requiring details about the funds’ source or use. Daily balances are easy to access and gauge, mistakes are detectable, and entries are kept up to date in cash books. Generally, cash books consist of two types – a general cash book and a petty cash book. But, there are three other types that companies use more often to handle cash dealings.

The three common types of cash books are single-column, double-column, and triple-column.

Single column  Double column  Triple column 

Single-column cash books (also called simple-column cash books) show cash entries received (receipts) on the left side or the debit side. In contrast, the right side or credit side contains cash payments. Bank transactions and discounts given for transactions are featured in separate ledger accounts in the case of single-column cash books. 

For double-column cash books, an additional column is reserved for discounts. Therefore, cash receipts and transactions are documented in one column, while the second column lists discounts received and provided. At the end of an accounting period, both columns are balanced, and closing balances are properly transferred. 

Triple-column cash books have two columns similar to the double-column cash book. The additional column is for bank transactions. Based on advances in the banking industry, most firms deal in checks. Meaning the presence of a bank column in a cash book is helpful in understanding transactions.

What are the uses of Cash Book? 

Cash books act as a subsidiary of the general ledger. All cash transactions during an accounting period are made in chronological order and recorded in it. The main goal of a cash book is to manage cash efficiently and make it easier to determine cash balances at any point. Managers and company accountants can budget their cash efficiently when this goal is accomplished. Also, it is faster to get cash information in a cash book than by following the cash through a ledger. 

The uses of a cash book include the following.

  • Recording information: Cash books record receipts and payments of cash. It acts as a book of original entries and a ledger account. Companies that maintain cash books do not have to open a cash account in the ledger. 
  • Organization: Cash dealings can be expensive, and businesses may lose track of things or have difficulty locating where transactions are placed. For this reason, it is crucial to maintain a cash book recording all cash transactions accurately and systematically. Keeping documents organized helps things run smoothly. 
  • Time & energy saver: It is not fun to sort through piles of documents and do extra work that you could avoid. Cash books help save time and energy by reducing the workload that accompanies maintaining cash transactions. Since it is handled date-wise, any cash payments or transactions can be correctly traced in the book. And any cash fraud in an organization will be detected easily. 

What is the format of a Cash Book? 

The cash book is separated into three columns. First is the single column. Also called a simple cash book, the single cash column records cash payments on the debit side (left side) and cash receipts on the credit side (right side). The entries about bank transactions and ledgers are on separate ledgers. Next, the two-column cash book has a debit and credit on each side. One column contains cash transactions, while the extra column notes transactions concerning discounts allowed or received. Discounts allowed are placed on the debit side, while discounts received will be on the credit side (they are an income). Then, the three-column cash book is the most detailed and comprehensive. It comprises three columns, each on the debit and credit side. One column has cash transactions, the second records bank transactions, and the third has transactions relating to discounts allowed and received.

How many columns are in a Cash Book? 

There are three columns in a cash book. Three are needed for discounts received and paid, cash transactions, and bank transactions. Three-column cash books (or triple-column cash books ) have three money columns on the debit and credit sides. There is one on each side for recording discounts, cash, and bank amounts. One column shows cash receipts and payments, the second records banking transactions, and the third notes discounts received and allowed. Keeping records of business transactions is crucial, so properly maintaining the books helps businesses run smoothly.

What are the advantages of a Cash Book? 

Cash transactions are abundant, and numerous companies use cash books to keep track of all their dealings. A cash book is a subsidiary book containing only cash-related transactions. It records all the cash receipts on the debit side and all cash payments on the credit side. However, cash books never show a credit balance, only a debit balance. While there are multiple advantages to using a cash book, disadvantages exist too.

Advantages Definition
Transactions related to cash receipts and payments If a cash book is not maintained and cash transactions are not placed in the journal, unnecessary time and labor will be needed to debit and credit the cash account for every cash transaction. 
Cash dealings are usually massive Cash can easily be lost or stolen by employees. The cash record must be up to date and properly monitored by a reliable person. 
The cash book is a book of the original record and part of the ledger If all cash transactions go through the cash book, then an abundance of labor can be avoided in needing to post every item individually to each account in the ledger.

What are the disadvantages of a Cash Book? 

 The table below shows the disadvantages of a cash book. 

Disadvantages Definitions
Only record cash transactions Cash books do not include all types of transactions like credit. Businesses cannot rely on this to make business decisions. 
Credit transactions are not displayed The liabilities of a business are unknown.
As for maintenance, it may take lots of time to start and maintain a cash book This varies based on the upkeep and the number of transactions involved. For large organizations, maintaining cash books can come at a high cost.

Is Cash Book a journal or a ledger? 

A cash book is a journal and a ledger. Journals are descriptive financial records of a business used for future reconciling. They are also used as a transfer to other books of accounts, such as the ledger. They are books of original entries. A cash book is a journal because all the cash and bank receipts and payments are documented in this book in a descriptive way, similar to journal posting. As for ledgers, they involve recording individual accounts in a summarized form posted in journals. They are books of principal entry. Cash books are deemed to be ledgers since all cash transactions made during a particular financial period are listed in the book in chronological order. When cash books are prepared, there is no need for cash accounts as the book serves the same purpose and can be used as a substitute. 

What is the difference between a Cash Book and Bank Statement? 

Cash books record all transactions for cash, checks, money orders, or postal orders. Bank statements are lists of entries for each account holder that has been made in their personal accounts. Most businesses use a two or three-column cash book to note any transactions made through a bank account. Every time cash, checks, money orders, or anything else is deposited into a bank, the cash book will be debited. If a check is issued to a supplier, an entry is created in the bank column on the credit side of the cash book. Businesses use cash books to remain aware of their position with banks, while banks maintain records to ensure their position with an account holder is known.