Chapter 9 Cash Book

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CASH BOOK
If the size of business is small, then it is possible to enter every transaction in Journal only,
but if the size of business is large, it is no longer possible to enter every transaction in one
book only. Therefore, Journal is divided into sub-parts, known as Special Journals.
Therefore, following subsidiary books are prepared:

CASH BOOK

All transactions relating to cash receipts and cash payments

are entered in this book

PURCHASE BOOK

This book records credit purchases.

SALES BOOK

This book records credit sales.

PURCHASE RETURN OR RETURN OUTWARD BOOK

When goods previously purchased on credit are returned to

the suppliers, such returns are added to this book

SALES RETURN OR RETURN INWARD BOOK

When goods previously sold on credit are returned by the

customers, such returns are added to this book

JOURNAL PROPER

This book records transactions which are not entered in

previous mentioned books

CASH BOOK (A Subsidiary and Principal Book)

It plays a dual role. It is both a book of original entry as well as a book of final entry. All cash
transactions are primarily recorded in it as soon as they take place; so it is a journal (a book
of original entry/subsidiary book). On the other hand, the cash aspect of all cash
transactions is finally recorded in the Cash Book (no posting in Ledger); so a Cash Book is
also a Ledger (a book of final entry/Principal Book)

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Distinction between Cash A/c and Cash Book:

In fact, Cash Book is a substitute for a Cash Account. Yet there are some differences
between the two, which are given below:

Cash Book Cash Account

1. It is a separate book in which cash 1. It is an account in a Ledger in which

transactions are directly recorded. posting is made from journal.

2. It serves the purpose of both journal 2. It serves the purpose of a Ledger

and ledger and hence cash only. If Cash A/C is opened in the
transactions need not be primarily Ledger, all cash transactions are first
recorded in Journal. recorded in journal.

3. Narration is required. 3. Narration is not required.

4. A column for Ledger Folio is provided. 4. A column for Journal Folio is

provided.

Cash book: Journal or Ledger?

Journal - since the transactions are recorded in it for the first time from the source
documents and from there these are posted to the respective accounts in the ledger.
Ledger - as when a cash book is prepared, no separate Cash account is opened in the ledger.
Thus, Cash Book is a journal as well as a ledger and hence it may be called as “journalized
ledger”.

Cash Book always shows Debit Balance:

Total of debit side will always exceed the credit side, because a person cannot pay more
cash than what he has with him. If money is paid by borrowing from someone, it will first be
recorded on the receipts side and only then it will be shown on the payments side.

TYPES OF CASH BOOKS:

Single Column Cash Book:

1. Enter the following transactions in the cash book of Mr. Jamil:

2018. Rs.
Jan. 1 Mr. Jamil started business with cash 2,00,000
Jan. 3 Bought goods for cash 1,40,000
Jan. 5 Paid for stationary 2,000

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Jan. 7 Sold goods for cash 80,000

Jan. 10 Paid for trade expenses 2,000
Jan. 11 Sold goods for cash 20,000
Jan. 14 Received cash from Mr. Asif 10,000
Jan. 15 Paid cash to Mr. Qadir 20,000
Jan. 18 Withdrew cash for personal use 6,000
Jan. 22 Bought goods for cash 40,000
Jan. 25 Sold goods for cash 90,000
Jan. 27 Paid for electricity bill 4,000
Jan. 31 Paid salary 10,000
Jan. 31 Paid rent 3,000

Solution:

Single Column Cash Book of Mr. Jamil

Date Particulars V.N. L.F. Amount Date Particulars V. L. Amoun

(Rs.) N. F. t
(Rs.)
2018 2018
Jan. Capital A/C 200,000 Jan.3 Purchases A/C 140,00
1 (Being business (Being goods bought 0
started) for cash)
Jan.7 Sates A/C 80,000 Jan.5 Stationery A/C 2,000
(Being goods (Being stationary
sold) purchased)
Jan. Sales A/C 20,000 Jan.1 Trade expenses 2,000
11 (Being goods 0 (Being expenses paid)
sold)
Jan. Mr. Asif A/C 10,000 Jan.1 Mr. Qadir A/C 20,000
14 (Being cash 5 (Being cash paid)
received)
Jan. Sales A/c 90,000 Jan.1 Drawing A/C 6,000
25 (Being goods 8 (Cash drawn for
sold) personal use)
Jan.2 Purchase A/C 40,000
2 (Being goods bought)
Jan.2 Electricity A/C 4,000
7 (Being bill paid)
Jan.3 Salary A/C 10,000
1 (Being salary paid)

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Jan.3 Rent A/C 3,000

1 (Being rent paid)
Jan.3 Balance c/d 173,00
1 0

4,00,00 4,00,00

Feb. Balance b/d 173,000

1

2. Enter the following transactions in a Single Column Cash Book and prepare Bank
A/c in ledger.

2018 Rs.
March 1 Cash in hand 80,000
March 1 Bank Balance 120,000
March 3 Received a cheque from Osman 24,000
March 4 Deposited Osman's cheque with bank --
March 8 Withdrawn from bank for business use 20,000
March 10 Goods sold for cash 30,000
March 15 Goods bought for cash 80,000
March 18 Goods sold for cash 60,000
March 20 Paid Rahim by cheque 26,000
March 30 Deposited into bank 16,000
March 31 Paid salary in cash 10,000
March 31 Paid rent by cheque 6,000

Solution:

Cash Book

Date Particulars V. L.F. Amount Date Particulars V. L. Amount

N. (Rs.) N. F. (Rs.)
2018 Balance b/d 80,000 2018
Mar. Osman A/C 24,000 Mar. Bank A/C 24,000
1 (Being cheque 1 (Being cheque
received) deposited)
Mar. Bank A/C 20,000 Mar. Purchases A/C 80,000
8 (Being amount 15 (Being goods bought
withdrawn) for cash)

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Mar. Sales A/C 30,000 Mar. Bank A/C 16,000

10 (Being goods 15 (Being cash
sold for cash) deposited)
Mar. Sales A/C 60,000 Mar. Salary A/C 10,000
18 (Being goods 30 (Being salary paid)
sold for cash)
Mar. Balance c/d 84,000
31

2,14,000 2,14,000

Apr.1 Balance b/d 84,000

Note: Bank balance and transactions dated 20th March and 31st March are not recorded in
Cash Book as they do not involve cash.

Bank Account In Ledger

Date Reference J/F Amount Rs. Date Reference J/F Amount Rs.
2018 2018

Mar. 1 Balance b/d 120,000 Mar. 8 Cash A/C 20,000

4 Cash A/C 24,000 20 Rahim A/C 26,000

5 Cash A/C 16,000 31 Rent A/C 6,000

31 Balance c/d 108,000

160,000 160,000

Double Column Cash Book

In this cash book, there are two columns on each side, one column for recording cash
transactions and the other column for recording bank transactions.
Contra Entry
In any account we can only have one half of a double entry. An account cannot be debited
and credited at the same time. For example, when we sell goods for cash, cash received will
be recorded on the debit side of Cash Book and the goods sold will be posted on the credit
side of Sales Account. But in Double Column Cash Book, we have two accounts, Cash A/c

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and the Bank A/c, so it is possible to have both a debit entry and a credit entry at the same
time. For example, cash of Rs.5,000 is deposited into the bank. In this transaction both Bank
A/c and Cash A/c are involved and they will be recorded on both sides of Double Column
Cash Book i.e. on the debit side in bank column and on the credit side in cash column.
Thus a transaction in which Cash A/c and Bank A/c are involved, is recorded on both the
sides of Double Column Cash Book, it is called "contra entry".
In recording such a transaction the letter "C", is written in 'L.F' column because both aspects
of the transactions are recorded and there is no need to post them into the ledger.
In this connection, the difference between contra entry and other entries in Cash Book may
be noted. ''The Double entry work of contra entry is completed in Cash Book. They need not
be posted to ledger". But the double entry work of other entries in Cash Book is not
completed, one aspect (i.e. cash aspect) of the transaction is, however, completed in Cash
Book, but the other aspect is not completed, which is to be posted to the concerned
account in ledger.
Contra entry will be passed in the following cases:
When cash is deposited into the Bank:
Bank column – debit
Cash column-credit.
When cash is drawn from the bank for business purposes:
Cash Column - debit
Bank column - credit.
When a cheque received from a debtor on a date subsequent to its receipt is deposited
into the bank:
Bank column - debit
Cash column - credit.

Enter the following transactions in a double column cash book/two column cash book.

2018 Rs.
March 1 Cash in hand 80,000
March 1 Bank Balance 120,000
March 3 Received a cheque from Osman 24,000
March 4 Deposited Osman's cheque with bank --
March 8 Withdrawn from bank for business use 20,000
March 10 Goods sold for cash 30,000
March 15 Goods bought for cash 80,000
March 18 Goods sold for cash 60,000
March 20 Paid Rahim by cheque 26,000
March 30 Deposited into bank 16,000
March 31 Paid salary in cash 10,000
March 31 Paid rent by cheque 6,000

Solution:

Double Column Cash Book

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Da Particulars V L/ Cash Bank Da Particulars V L/F Cash Bank

te / F Rs. Rs. te / Rs. Rs.
N N
20 20
18 18
Ma Balance b/d 80,000 120,00 Ma Bank A/c C 24,00
r. 1 0 r. 4 (Being cheque 0
deposited)
3 Osman A/c 24,000 8 Cash A/c C 20,00
(Being cheque (Being cash 0
received) withdrawn from
bank)
4 Cash A/c C 24,000 15 Purchase A/c 80,00
(Cheque (Being goods 0
deposited with bought)
bank)
8 Bank A/c C 20,000 18 Cash A/c C 16,00
(Being cash 0
drawn from
bank)
10 Sales A/c 30,00 20 Rahim A/c 26,00
(Being goods sold 0 (Cheque issued) 0
'for cash)
18 Sales A/c 60,00 31 Salary A/c 10,00
(Being goods sold 0 (Being salary paid) 0
for cash)
30 Cash A/c C 16,000 31 Rent A/c 6,000
(Being cash (Being rent paid by
deposited) cheque)
31 Balances c/d 84,00 108,0
0 00
214,00 160,00 214,0 160,0
0 0 00 00

Ap Balance b/d 84,000 108,00

ril. 0
1

Petty Cash

It is another Cash Book which is maintained, generally, in large business concerns to reduce
the burden of 'Main Cash Book', in which numerous transactions involving petty (small)

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amounts are recorded. For this purpose, a Petty Cashier is appointed by the Chief Cashier.
The Chief Cashier advances a sum of money to the Petty Cashier to enable him to meet
petty expenses for a fixed period. The Petty Cashier will record this amount on the Debit
Side of the Petty Cash Book while the Chief Cashier will record the same amount on the
Credit Side of the Main Cash Book.

System of Petty Cash Accounting:

1. Open System:

Under this system the Petty Cashier at first receives from the Chief Cashier a fixed sum of
money for meeting petty expenses. As soon as the said amount is spent, the Chief Cashier
again pays the required sum to the Petty Cashier.

2. Fixed Advance System:

Under this system the Petty Cashier receives from the Chief Cashier a fixed Sum of money
for a fixed period of time i.e. Rs.200 per month. The Chief Cashier will pay Rs.200 to the
Petty Cashier every month irrespective of this that whether the Petty Cashier has spent the
total sum or not.

3. Imprest System:

In this system, the total petty expenses for a particular period are estimated and that
amount is advanced by the Chief Cashier to the Petty Cashier. This amount is called Imprest
Cash. On the expiry of the fixed period the Petty Cashier prepares a statement of his
expenses and submits it to the Chief Cashier. This statement is known as Statement of Petty,
Expenses. The Chief Cashier examines the statement and if he finds it correct, hands over
the Petty Cashier an amount equal to the amount actually spent. This amount plus the
amount lying unspent with the Petty Cashier will be equal to the Imprest Cash.

The balance of the Petty Cash Book will be shown on the asset side of balance sheet as
"Cash in hand" at the end of the year.

Example:

From the following particulars prepare a Petty Cash Book under Imprest System.

2018

Jan. 1. Received from the Chief Cashier as imprest cash Rs.400.

Jan. 2. Paid Taxi hire Rs.20.
Jan. 3. Paid postage Rs.28 and stationery Rs.60.
Jan. 4. Purchased stationery Rs.48.
Jan. 5. Paid telegram charges Rs.28 and bus fare Rs.4.

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Jan. 6. Bought postage stamps Rs.96.

Jan. 7. Paid Rs.72 for repairs of typewriter.

Solution:

Petty Cash Book

Amount Traveling Office Misc.

Dat V. Total Postag Station
Received Particulars Expenses Expenses Expenses
e No. Rs. es Rs. ery Rs.
Rs. Rs. Rs. Rs.
400 201 Cash Received
8
Jun.
1
Jun. Taxi hire A/c 20 20
2
Jun. Postage A/c 28 28
3
Jun. Stationery A/c 60 60
3
Jun. Stationery A/c 48 48
4
Jun. Telegram A/c 28 28
5
Jun. Bus fare A/c 4 4
5
Jun. Postage A/c 96 96
6
Jun. Repairs A/c 72 72
7

356 24 152 108 72

Balance c/d 44

400 400

44 Jun. Balance b/d

8
356 Cash received

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