INTRODUCTION
 All the transactions are first entered in the
journal in the order in which they occur and from the
JOURNAL they are posted to the respective accounts
in the ledger.
 But this involves a tremendous amount of work
because each transaction requires a separate DEBIT
to the receiving account and CREDIT to the giving
account to bring into record the two-fold aspect of
each transaction.
Thus when all transactions used to be recorded in the
journal, the book became too unwieldy to handle and the
desired information to be extracted from the books of
accounts was difficult to obtain readily.
Therefore all cash transactions began to be recorded
separately in a book called “CASH BOOK” ,which later
began to be used to record bank and discount transactions
as well besides cash transactions.
By doing so daily checking of cash in hand and periodical
checking of cash in hand and periodical checking of bank
balance was rendered quick and easy.
 The practice these days is to keep a separate
subsidiary book to record such transactions of
identical nature rather than recording many
times during a month.
 Each subsidiary book is meant for recording all
the transactions of a similar nature.
 For Example: All cash transactions may be
recorded in one book, all credit purchase
transactions in another book and all credit sale
transactions in yet another book and so on….
Cash
Book
Purchase
Book
i.
Sales
Book
Purchase Sales
Return
Return
Book
Book
Single Column Cash Book
ii. Double Column Cash Book
iii. Triple Column Cash Book
iv. Petty Cash Book
Bills
Bills
Journal
Receivables Payables Proper
Book
Book
1. CASH BOOK: This book is used for recording all
transactions relating to cash receipts and cash payments.
All banking transactions relating to receipts and payments
are also recorded in this book.
2. PURCHASE BOOK: This book is used for recording the credit
purchases of goods.
3. SALES BOOK: This book is used for recording the credit
sales of goods.
4. BILLS RECEIVABLE BOOK: This book is used for recording
the receipts of bills receivables, promissory notes or
hundis from various parties. The trader is to receive
payment for these bills.
5. BILLS PAYABLE BOOK: This book is used for recording the
issue of bills payables, promissory notes or hundis to various
parties. The trader is to make payment for these bills.
6. PURCHASE RETURN BOOK or RETURN OUTWARD BOOK:
When the goods previously purchased on credit are returned
to the suppliers, such returns are recorded in this book.
7. SALES RETURN BOOK OR RETURN INWARD BOOK: When
goods previously sold on credit are returned by the
customers, such returns are recorded in this book.
8. JOURNAL PROPER: This book is used for recording the
transactions which cannot be recorded in any of the above
mentioned books.
 Thus, instead of recording the transactions in a single journal,
eight journals are prepared as mentioned above.
♦ A cash book records all cash transactions.
♦ As the number of cash transactions in a
business is quite large, so it is quite
impracticable and inconvenient to record all cash
transactions in the journal.
♦ This book enables a businessman to know the
balance of cash in hand and at bank at any point
of time.
♦ It also gives information about the daily receipts,
payments and the closing cash balance at the
end of each day.
Cash book achieves a dual purpose:
As all cash transactions are recorded for
the first time in the cash book, it is
therefore a SUBSIDIARY BOOK (book of
original entry). But when a cash book is
prepared, cash account in the ledger is not
prepared. In this way, cash book
represents the cash account and hence,
becomes the PRINCIPAL BOOK of accounts.
Distinction between Cash A/C And Cash Book
S. No.
Cash Account
Cash Book
1.
It is an account in the Ledger.
It is a separate book maintained for
recording Cash transactions.
2.
It is opened in the ledger and
posting is done in this account from
journal.
It is a book of original entry because
all cash transactions are first of all
recorded in Cash book and then
posted from Cash book to various
accounts in the ledger.
3.
When transactions of Cash are
recorded in journal, it is necessary
to open a Cash Account in ledger.
When transactions of Cash are
recorded in Cash book, there is no
necessity to open a Cash account in
the ledger.
4.
It only records one aspect of a
transaction, i.e., Cash.
It records both the aspects of
transaction.
Cash Book plays dual role as a book of original
entry as well as a ledger.
It is a subsidiary book because all cash
transactions are first recorded in it and then from
cash book posted to various account in the
ledger.
The recording of transactions in the cash book
takes place the shape of a ledger account.
As receipts of cash are entered on debit side
and payments of cash on the credit side, so there
is no need of preparing cash account in the
ledger. Therefore cash book serves the purpose
of a ledger account.
1. Just like a journal, transactions in the cash book are
recorded for the first time from source documents.
2. Just like a journal transactions in the cash book are
also recorded date wise, i.e. in a chronological order,
as and when they take place.
3. Just like a journal, transactions from cash book are
also posted to the relevant accounts(except cash
account) in the ledger.
4. Just like a journal, a cash book also contains a
Ledger Folio Column.
1. Form of cash book closely resembles to a ledger
account. It has two equally divided sides having
identical columns. The left side(receipt side) is the
debit side and the right side(payment side) is the credit
side.
2. Cash book itself serves as a cash account also and as
such when a cash book is maintained, cash account is
not opened in the ledger. The cash book, hence, is a
part of ledger also.
3. Just like a ledger account, the words “To” and “By” are
used in a cash book also.
4. It is balanced just like a ledger account.
1. Cash book prevents duplication of work in recording cash
transactions in the journal and then posting them into the
ledger as a cash book acts both as a journal as well as a ledger
2. A cash account is not opened when a cash book is maintained,
therefore it prevents the size of the ledger to be too
voluminous.
3. Both cash and bank transactions can be entered in the cash
book.
4. It helps a businessman to know the balance of Cash in hand
and at bank at any point of time without waiting for posting
from the journal.
5. It gives daily information about receipts, payments and the
closing cash and bank balance at the end of each day.
6. The Cash balance, as shown in cash book, must be equal to
the actual cash in hand. A regular verification of the balances
reduces the possibility of any kind of misappropriation of
cash.
Simple
Cash
Book
Petty
Cash
Book
Types
of Cash
Book
Three
Column
Cash
Book
Two
Column
Cash
Book
SIMPLE CASH BOOK
This type of cash book makes a record of all the
receipts and payments of cash. All cash received in the
form of coin, notes, cheques, postal orders, bank drafts,
or treasury notes will be recorded on the debit side and
payments on the credit side. The ruling of this type of
cash book is as follows:
Dr. (Receipts)
Date
Particulars
SIMPLE CASH BOOK
R.No.
L.F.
Amount
Rs.
Date
Cr.(Payments)
Particulars
V.No.
L.F
Amount
Rs.
1. DATE: Day, month and the year of the transaction is
recorded in this column.
2. PARTICULARS: The name of the account in respect of
which cash has been received or payment has been
made is recorded in this column.
3. R.No. (RECEIPT NUMBER): The serial number of the
receipt certifying the amount received is written in this
column.
4. V.No. (Voucher Number): The serial number of the
voucher certifying the payment is written in this
column.
5. L.F. (Ledger Folio): This column records the page
number of the ledger where the posting of this account
has been made.
6. AMOUNT: The amount of the transaction is recorded in
this column.
Opening balance on the debit side of cash book is
not posted to any account in the ledger as it comes in
the cash book from the opening entry recorded in
the journal proper.
The other transactions recorded on the debit side of
cash book are posted to the credit side of the
respective accounts in the ledger to complete the
second aspect of the entry.
Similarly, the entries appearing on the credit side of
cash book are posted to the debit of respective
accounts in the ledger.
At regular periodic intervals, preferably daily,
cash book should be balanced like other
ledger accounts and the balance shown by it
should be equal to cash in hand, if no mistake
or fraud has been committed. Cash book
should always show a debit balance (i.e., cash in
hand) because total cash paid can never exceed
the opening balance plus cash received.
Illustration
Enter the following transactions in a single column
cash book:
2012
July 01
July 08
July 15
July 20
Balance of cash in hand
Purchased goods for cash from X
Sold goods for cash to Y
Received commission
Paid commission
July 28 Paid to A on account of sales
July 31 Paid salary to the office clerk
and office rent
Rs.
16000
4200
5800
1650
1550
8150
2000
1600
SOLUTION:
DATE
PARTICULARS
R. L AMOUNT
No F
2012
DATE
PARTICULARS
V
L AMOUNT
No F
2012
July 1
To Balance b/d
16000
July 08
By Purchases
4200
July
15
To sales
5800
July 20
By commission
1550
July
20
To commission
1650
July 28
By A
8150
July 31
By salary
2000
July 31
By office rent
1600
July 31
By balance c/d
5950
23450
Aug 1
To balance b/d
5950
23450
Double Column Cash Book
When discount is allowed on the receipt of cash and discount is
received when payment is made to the suppliers, it becomes
desirable to add discount column along with cash on both sides
of the cash book. There will be two columns for discount and
cash on each side of the cash book and that is why it is known
as Double or Two Column Cash Book. Discount column is only
memorandum column and not based on the double entry
system. Cash discount is allowed by a creditor to a debtor
when the latter pays the amount of goods purchased by him
either immediately or within a specific period. It is an incentive
given to a debtor for making an early payment.
Dr.
Date
Particulars
CASH BOOK
Rno LF Discount Cash Date
Rs.
Rs.
Particulars
Rno LF Discount
Rs.
Cr.
Cash
Rs.
The cash column of Cash Book is balanced in the same way as
in simple cash book. Discount column of such cash book on both
sides will not be balanced but simply totals are done.
The posting of cash columns will be same as it is done in simple
cash book. Each item of discount allowed appearing on the debit
side of the cash book will be posted to the credit of respective
personal account and total of discount column should be posted
to the debit side of Discount Account with the words “To Sundry
Accounts” or “Amount As Per Cash Book”. Similarly, each item of
discount received appearing on the credit side of the cash book
in the discount column will be posted to the debit of respective
personal account and total of discount received column should
be posted to the credit of Discount Account with the words “By
Sundry Accounts” or “By Amount as per Cash Book”.
ILLUSTRATION
Enter the following transactions in a cash book
with cash and discount columns :
2012
Rs.
June 01 Balance of cash in hand
7000
June 01 Received cash from Sohan
2000
June 03 Paid into bank
2800
June 09 Paid to Mehta and sons for goods
purchased
3000
June 10 Received from cash sales
2800
June 11 Paid for cash purchases
2920
and received discount
1080
June 13 Withdrew for personal use
2000
June 19 Received from Kapoor Bros.
2160
and allowed discount
1040
June 20 Drew from bank for office use
1800
SOLUTION:
DATE
PARTICULARS
2012
L DISCF OUNT
Rs.
June1
To Balance b/d
June1
To Sohan
June10
To Sales
June19
To Kapoor Bros.
June20
To Bank
CASH
DATE
Rs.
2012
7000
1040
L DISCF OUNT
Rs.
CASH
Rs.
June3
By Bank
2800
June9
By Mehta &
Sons
3000
2000
1040
PARTICULARS
2800
June11
By Purchases
2160
June13
By Drawings
2000
1800
June30
By Balance c/d
5040
15760
1080
1080
2920
15760
BANKING TRANSACTIONS
Money can be deposited with a bank by opening three types of accounts:
Current Account
• Money can be
deposited and
withdrawn as and
when required
without any notice.
• Facility of overdraft is
available.
• No interest is
allowed.
• Preferred by
businessmen.
Savings Bank Account
• Deposits can
be made when
desired.
• Restrictions
on the number
and amount of
withdrawals.
• Interest is
allowed.
• Does not suit
businessmen.
Fixed Deposit Account
• Money is
deposited for a
fixed period.
• Withdrawal is
often made when
the period
expires.
• Fixed rate of
Interest is
received on the
deposit.
DEPOSITS AND WITHDRAWALS
Cash or cheques and demand drafts can be deposited in an
account (saving or current) opened in the bank by filling up a
form called pay-in-slip. There is a counterfoil (perforated) in
the pay-in-slip which is stamped and signed by the banker’s
cashier and returned to the client as a proof of money
deposited in the bank. Separate pay-in-slips have to filled in for
depositing cash, local cheques, outstation cheques and
demand drafts. Different pay-in-slips will be filled in for cheques
drawn on different banks whereas one pay-in-slip for more than
one cheque drawn on the same bank can serve the purpose.
Withdraws from a bank account can be made by means of
cheques or by filling in withdrawal forms supplied by the bank.

According to S e c t i o n 6 of N e g o t i a b l e In s t r u m e n t
A c t , 1 8 8 1 , “A cheque is a bill of exchange drawn on
a specified banker and not expressed to be payable
otherwise than on demand”.
 It is a negotiable instrument which does not express
any time of payment and is payable on demand.
TYPES OF CHEQUES
i.
Open cheque:
An open cheque is one which can be encashed at the counter of
the bank. It need not be deposited in an account through a bank.
It can be of two types:
(a) Bearer cheque: When a cheque is payable to a person named
in the cheque or the bearer thereof, it is called a bearer cheque.
(b) Order cheque: An order cheque is payable to the person
named in the cheque or his order.
ii. Crossed cheque:
When a cheque is not payable at the counter of the bank and is
collected through a bank, it is called a crossed cheque.
 According to section 85 of the Indian Negotiable Instrument
Act a bank draft is “an order to pay money drawn by one
office of a bank upon another office of the same bank for a
sum of money payable to order on demand”.
 They are popularly known as demand drafts because they
are always payable on demand without any days of grace
and there cannot be any bearer drafts.
 It is always payable to a certain person named in the draft
or to his order.
 They are issued by banks to customers on request and
against payment by the customer (usually effected by
debiting the customer’s account).
S. No.
Cheque
Demand Draft
1.
Drawn by customer of the bank.
Drawn by one office of a bank upon
another office of the same bank.
2.
May be drawn payable to bearer.
Cannot be made payable to bearer.
3.
No commission is involved.
For getting the facility of a bank
draft, commission is payable to
bank.
4.
Payment can be stopped.
Payment cannot be stopped easily.
5.
It may be dishonoured.
It will not be usually dishonoured.
THREE COLUMN CASH BOOK
These days payments are mostly made to other
parties by cheques . Similarly, we get cheques from
other parties for the amounts which are due to them.
Under such circumstances, it is desirable to add one
more column for Bank on both sides of the cash
book which already contains cash and discount
columns.
Dr.
Date
Cash Book
Particulars
LF Discount Cash Bank Date
Rs.
Rs.
Rs.
Cr.
Particulars LF Discount
Rs.
Cash
Bank
Rs.
Rs.
 All the contents of a triple column cash book are the same as
a double column cash book except the discount column.
 Discount columns are memorandum columns and are not
based on double entry system.
 Cash columns represent cash account and must have a debit
balance.
 Bank column may have debit or credit balance. If amount
withdrawn is more than deposited in the bank, it will have
credit balance or overdraft as per bank column of the cash
book.
ILLUSTRATION
Enter the following transactions in a three column cash book:
2012
Jan 01 Cash in hand
Cash at bank
Jan 05 Cash Sales
Jan 08 Paid into bank
Jan 10 Received a cheque from X
Jan12 Paid into bank X‘s cheque for
Jan15 Received cheque from Y
and allowed him discount
Jan18 Paid to Anu by cheque
and discount allowed by him
Jan 25 Cash purchases
Jan 29 Withdrew from bank for office use
Rs.
6374
16490
7400
8000
1700
1700
1950
1050
1980
120
3500
6000
SOLUTION:
DATE
PARTICULARS
V L DISCN F OUNT
2012
Rs.
Jan1
To balance b/d
Jan5
To sales
Jan8
To cash
Jan10
To X
Jan12
To cash
Jan15
To Y
Jan29
To bank
To balance b/d
BANK
DATE
Rs.
Rs.
2012
16490
Jan8
By bank
C
Jan12
By bank
C
Jan18
By Anu
Jan25
By purchases
Jan29
By cash
Jan31
By bal c/d
6374
7400
C
8000
1700
C
1700
1050
C
PARTICULARS
V L DISCN F OUNT
Rs.
CASH
BANK
Rs.
Rs.
8000
1700
120
1980
3500
C
6000
1950
6000
1050
Feb1
CASH
23424
26190
10224
18210
120
10224
18210
23424
26190
multi-columnar cash book
• Multi-columnar cash book is usually maintained by large
business enterprises.
• The receipts and payments side of this book are divided
into such columns which are frequently needed for
making cash transactions which occur again and again.
• Cash transactions pertaining to columns pertaining to
columns provided in the cash book are written in their
particular columns and the total of such columns like
discount is posted in their accounts posted in the ledger.
• In this way posting of cash transactions occurring again
and again is not required, only posting of the total of
various columns is made in their respective accounts.
This type of cash book can be maintained to have
control on cash in hand. It is like a three column cash
book with a difference that of on any day cash balance
falls short by the minimum amount to be maintained in
hand, the shortage of minimum cash in hand will be
made up by withdrawing cash from a bank by passing a
contra entry. Similarly, if on any day cash in hand is
found to be excess than the maximum amount of cash in
hand to be maintained, the excess cash in hand will be
deposited into the bank by passing a contra entry.
However, if cash in hand lies between the minimum and
maximum balance of cash to be maintained, no contra
entry will be made for withdrawal or deposit of cash into
bank.
 It is undesirable to burden a cash book with a large
number of transactions with numerous small payments.
 Therefore a separate book called “PETTY CASH BOOK” is
maintained to record such small transactions.
 The person who records such transactions is called a
‘PETTY CASHIER’
 In such a petty cash book, a separate column for each
usual head of expenditure and for the total small cash
payments is provided.
 This book is also known as “Analytical Petty Cash Book”
because the various small cash payments get automatically
analyzed when they are entered in their respective columns.
Dr.
Cash Received Date
Petty Cash Book
Particulars
Vr.No.
Total
Stationery & Printing
Cartage
Cr.
Conveyance
Postage & Telegram Sundry Expenses
POINTS TO REMEMBER WHILE MAINTAINING
PETTY CASH BOOK
i. The amount fixed for petty cash should be sufficient so
that small payments for a fixed period may be easily
met out of that amount.
ii. The amount to be reimbursed to the petty cashier must
be supported by the vouchers (filed in order) along
with a statement of total payments.
iii. The petty cashier should be authorized to make
payment with the consent of the head cashier upto a
specified limit.
iv. The petty cashier should not receive any cash except
for the reimbursement of small payments.
ILLUSTRATION
Enter the following transactions in an Analytical Petty Cash
Book:
Each month starts with an opening cash balance of Rs. 2000
2012
March
March
March
March
March
March
March
March
March
March
March
March
01
03
05
06
07
08
10
18
25
26
27
30
Wages paid to peon
Coolie wages
Stationery
Railway Freight
Postage Stamps
Ink
Telephones
Unpaid Letters
Soap
Sweeper’s Wages
Sundry Expenses
Printing Price List
Rs.
250
160
125
110
150
110
110
104
106
130
200
190
SOLUTION:
Amt.
Recd.
Date
Particulars
V.
No.
Total
Payment
Postage &
Telephone
Stationery
& Printing
Conveyance
Wages
Sundry
Expenses
Rs.
2012
Rs.
Rs.
Rs.
Rs.
Rs.
Rs.
2000
1/3
To balance b/d
1/3
By Peon Wages
1
250
250
3/3
By Coolie Wages
2
160
160
5/3
By Stationery
3
125
6/3
By Railway Freight
4
110
7/3
By Postage Stamps
5
150
8/3
By Ink
6
110
10/3
By Telephones
7
110
110
18/3
By Unpaid Letters
8
104
104
25/3
By Soap
9
106
26/3
By Sweeper’s Wages
10
130
27/3
By Sundry Expenses
11
200
30/3
By Printing of Price
List
12
190
1745
31/3
2000
By balance c/d
255
2000
125
110
150
110
106
130
200
190
364
425
110
540
306
Cash book is a subsidiary book and a
principal book of recording.
It is a journalized ledger.
There are four types of cash book,
i.e., simple cash book, two column cash
book, three column cash book, and
multi column cash book.
There are two types of cheques, i.e.,
open and bearer cheques.