The Cash Book

This is the book of prime entry used to record all transactions involving the receipt and
payment of cash. The cash book has two sides which are, the debit side recording all cash
receipts and the credit side recording all payment or disbursement of cash. At the end of any
given period, the two sides are summed up and any balance is carried forward to the next
operating period. It is important to note that the cash book is a book of original entry as well
as a ledger account for cash transactions.

There are three (3) types of cash book

a. Single column cash book
b. Double column cash book
c. Three column cash

Single Column Cash Book: it has only two sides recording receipt and payment of cash. On
the left-hand is the debit side for receipts while on the right-hand is the credit side for
payments.

What Is a Single Column Cash Book?

The single column cash book resembles a T-shaped cash account in almost all respects. The
pages of this book are vertically divided into two equal parts.
The receipts are entered on the left (debit) side. Payments are entered on the right (credit)
side.
A single column cash book has only one money column on the debit and credit sides to
record cash transactions.
This is the reason why it is called a single column cash book (or a simple cash book).
Explanation
A single column cash book records only cash receipts and payments.
This form of a cash book has only one amount column on each of the debit and credit sides of
the cash book.
All the cash receipts are entered on the debit side, and cash payments are entered on the credit
side.
In essence, a single column cash book is nothing but a cash account. A cash account cannot
show a credit balance on the principle that you cannot pay what you do not have.
This means that a cash account always shows a debit balance or nil balance.
Format of a Single-Column Cash Book
The standard format of a single column cash book is shown below.

Date Particular Inv No. Amount Date Particular Inv. No. Amount

Functions of the Columns in a Single Column Cash Book

The format above consists of five columns on both sides of the cash book. The
purpose/function of each column is briefly described in this section.
Date Column
The year, month, and day of the receipts and payments of cash are written in the date column
on the debit and credit sides of the cash book.
Don't repeat the year and month for additional entries until a new month starts (or a new page
is added).
Description Column
The description column starts with the words "balance brought down" or simply "balance."
This column shows the cash balance at the start of the current period. After recording the
opening balance in the description column, the cash transactions of the current period are
recorded.
When cash is received on an account, the name of that account is written on the debit side.
When cash is paid on an account, the name of the account is written on the credit side in the
description column.
Voucher Number
For every entry recorded in the cash book, there must be a proper voucher.
When money is received, an original receipt is given to the payer and the payee retains a
copy.
This receipt is called a debit voucher because it supports the entries on the debit side of the
cash book.
When a payment is made, an original receipt is obtained from the payee. This receipt is called
a credit voucher because it supports entries on the credit side of the cash book.
The debit voucher's serial number is recorded on the debit side, and the serial number of the
credit voucher is recorded on the credit side in the cash book's voucher number (V. No.)
column.
Posting Reference
When entries from the cash book are posted to ledger accounts, the relevant account number
is written in this column.
Amount Column
The amount column is used to enter the amount received or paid as a result of a cash
transaction.
Balancing the Cash Book
At the end of the day, or at the end of the accounting period, the amount columns on both
sides are totaled.
The cash column's total on the debit side will always exceed the total of the credit side. This
is because we cannot pay more cash than we have received.
The difference represents the actual cash in hand, which should agree with the amount of
cash in the cash box.
To make the two sides of the single column cash book equal, the difference is written on the
credit side as "balance carried down" or simply "balance."
Posting the Single Column Cash Book to the Ledger
The following points should be kept in mind when posting the single column cash book to the
relevant accounts in the ledger.
First, the opening and closing balances of the cash book are not posted.
Second, the items on the debit side of the cash book are posted to the credit sides of the
accounts in the ledger, and the respective account numbers are entered in the posting
reference column of the cash book.
Finally, the items on the credit side of the cash book are posted on the debit sides of the
accounts in the ledger, and the respective account numbers are entered in the posting
reference column of the cash book.
Example
Record the transactions shown below in a single column cash book and post to the ledger.
For the year 2016, the transactions are as follows:

 Sep. 01: Cash in hand (balance b/d) $2,327
 Sep. 02: Paid salaries for August $1,500
 Sep. 05: Cash received from S & Co. $1,360
 Sep. 06: Purchased merchandise for cash $ 700
 Sep. 07: Cash sales for the first week $2,350
 Sep. 10: Paid cash for office furniture $1,540
 Sep. 12: Purchased stationery for cash $85
 Sep. 15: Cash sales for the second week $4,500
 Sep. 17: Cash paid to A & Co. $890
 Sep. 20: Purchased merchandise for cash $1,230
 Sep. 21: Cash sales for the third week $1,200
 Sep. 24: Cash received from S & Co. $1,200
 Sep. 28: Paid office rent $800
 Sep. 30: Cash sales for the last week $3,600
Solution

Class Excercise
Jejelaiye Enterprises commenced business with N300, 000 cash on May 1, 2020 and
presented the following transactions for the month:
₦
May 5 Paid rates 10,000
May 10 Purchases 75,000
May 14 Sales 217,500
May 16 Paid wages 4,000
May 18 Bought motor vehicle with cash 220,000
May 25 Sales 420,575
May 27 Purchases 105,000
May 28 Paid electricity bill 3,305
You are required to prepare the cash book for the month.
Example 2

Following are the transactions of ABC Ltd. for July 2018:

DATE TRANSACTION AMOUNT

July 01, 2018 Balance of cash in hand 30000

July 03, 2018 Salary paid to D 5000

July 09, 2018 Withdrawn from bank 8000

July 10, 2018 Cash Sales 7000

July 15, 2018 Goods purchased in cash 15000

July 17, 2018 Paid carriage inwards 1000

July 19, 2018 Paid for machinery repairs 3000

July 22, 2018 Debts recovered from H 2000

July 31, 2018 Rent Paid 10000

Enter the above transactions in a simple or single column cash book.

 Solution

Double Column Cash Book

The double column cash book has two columns on both sides of the account, one column for
cash and one for bank. The cash column records the cash transactions that involve cash in
hand while the bank column records cash transactions involving cash in the bank. The source
documents for the bank transactions are mainly cheques and deposit slips (or tellers). The
term contra entry is common in the double column cash book. Contra entry occurs when cash
is taken from cash in hand and lodged into the bank or when cash is withdrawn from the bank
for office use; it is denoted by (c) in the book.
Date Particular Inv No. Cash Bank Date Particular Inv Cash Bank
No.

Example
Prepare double column cash book from the book from the following information for
September 2023
 01 Cash in hand Rs.7,500
01 Bank overdraft Rs.3,500
03 Paid wages in cash Rs.200
05 Cash sales Rs.7,000
10 Cash deposited into bank Rs. 4,000
15 Goods purchased and paid by cheque Rs.2,000
20 Paid rent Rs.500
25 Drew from bank for personal use Rs.400
30 Salary paid with Cash Rs.1,000

Mr Danbaba started business on 1st January 2022. His transactions for the first
month of operation are as follows:
₦
Jan 1 deposited into bank to start the business 50,000
Jan 2 bought goods and paid by cheque 30,000
Jan 3 withdraw cash from bank 50,000
Jan 7 sold goods for cash 40,000
Jan 8 cash paid into bank 30,000
Jan 9 paid sundry expenses by cash 4,000
Jan 15 bought goods on credit form Adams 50,000
Jan 16 sold goods on credit to Dipo 40,000
Jan 18 Dipo returns part of the goods sold to him worth 5,000
Jan 19 sold goods on credit to Falomo 20,000
Jan 21 bought typewriter on credit from Akin worth 5,000
Jan 22 paid wages by cheque 2,000
Jan 25 bought stationery by cash 3,000
You are required to prepare the double column cash book of Danbaba.

Three Column Cash Book

The three column cash book has an additional column on both sides of the account which
distinguishes it from the double column cash book. The additional column is for discounts.
Discount allowed is shown as a memorandum column on the debit side of the cash book
while discount received is shown as a memorandum column on the credit side of the cash
book. Since they are memorandum columns only, the records therein do not form part of the
double entry.
Date Particular Inv Disct Cash Bank Date Particular Inv Disct Cash Ban
No. Allow No. Recei k
d vd

What is a Three Column Cash Book?

A cash book with three columns for discounts received and paid, cash transactions, and bank
transactions is known as a three column cash book.

Explanation
A three column cash book, also known as a triple column cash book, contains three money
columns on both the debit and credit sides: one on each side for recording discount, cash, and
bank amounts.

If a business holds a bank account frequently makes receipts and payments through that bank
account, then it is useful to maintain a three column cash book rather than a single or double
column cash book.

It is customary for businesses to allow discounts for early payments. For example, if cash is
paid early, creditors may receive a discount. On the other hand, if debtors pay early, a
discount may be allowed to them.

You may remember that cash and discounts are closely related. This is the reason why
discount columns are also provided in the cash book.

In a three column cash book, three columns are provided for the amounts on each side. One
column records cash receipts and payments, the second records banking transactions, and the
third records discounts received and allowed.

Although single and double column cash books are alternatives to a cash account, the three
column cash book serves the purpose of cash as well as a bank account.

Discount Columns: Key Points

Consider the following critical aspects of discount columns in a triple column cash book:

The discount allowed column is located on the debit side and the discount received column is
located on the credit side.
The discount allowed and discount received columns represent two different accounts. They
are not related.
The discount columns are memorandum columns in nature. Therefore, two separate accounts,
"Discount Allowed" and "Discount Received", are opened in the ledger.
Since discount allowed and discount received are unrelated, they are not balanced. Both
columns are summed separately and the aggregate is transferred to the ledger accounts.
Format of a Three Column Cash Book
The common format used in a three column cash book is shown below.

Standard Format of Three Column Cash Book

It is worth mentioning that the format of a three column cash book is similar to that of a two
column cash book.

The only exception is that a column is added in a three column cash book to account for
bank-related transactions.

Hints for Record Keeping in a Three Column Cash Book

If you are ever recording entries in a three column cash book, this section presents a few key
points you should bear in mind.

Opening Balance
The opening balance of cash in hand and cash at the bank are recorded on the debit side in the
cash and bank columns, respectively.
If the bank balance is a credit balance (overdraft), then it is entered on the credit side in the
bank column.

Receipt of Cheque or Cash

If a cheque is received and deposited into a bank account on the same date, it will appear on
the debit side on the cash book in the bank column.

If the cheque is not deposited into a bank account on the same date, it is treated as cash and,
therefore, the amount will appear in cash column.

Finally, in the usual manner, the receipt of cash is recorded in the cash column.

Payment by Cheque or Cash

If a payment is made by cheque, it will be recorded on the credit side in the bank column.
This is because the cash at bank has decreased.

If the payment is made in cash, it will be recorded in the cash column in the usual manner.

Bank Charges
Bank charges are recorded on the credit side of the cash book in the bank column. This is
because cash at bank decreases as a result of such charges.

Contra Entries: Definition

If an entry is made on the debit side and the same entry is recorded on the credit side of the
cash book, it is called a contra entry.

To differentiate contra entries from other entries, letter "C" is printed in the posting reference
column (on both the debit and credit sides of the cash book).

The letter "C" indicates that the contra effect of this transaction is recorded on the opposite
side.

Contra entries may be one of the following types:

Type 1
When cash is deposited into a bank, two entries are required: one on the credit (payment) side
in the cash column, which records the reduction in cash in hand; and the other on the debit
(receipt) side in the bank column, which records the increase in cash at bank.

Type 2
When cash is withdrawn from a bank for office use, two entries are needed: one on the credit
side in the bank column, which records the reduction of cash at bank; and the other on the
debit side in the cash column, which records the increase in cash in hand.

Type 3
It has already been explained that when a cheque is received and not deposited into a bank on
the same date, the amount will be recorded on the debit side of the cash book in the cash
column.
When the same cheque is deposited into a bank account on another date, two entries are
required: one on the debit side in the bank column, which records the increase in the amount
at bank; and the other on the credit side in the cash column, which records the cash (cheque)
paid into the bank.

Balancing the Three Column Cash Book

Whenever it is necessary to determine the bank balance, the bank columns are summed on
both sides.

If the debit column is larger than the credit column, the difference represents cash at bank. If,
on the other hand, the credit column exceeds the debit column, the difference represents
"overdrawn balance".

A bank account may have an overdrawn balance because by arranging an overdraft with the
bank, it is possible that more money may be withdrawn from the bank than what was
deposited.

The cash columns are balanced as usual. The discount columns are simply summed and not
balanced. An overview of this procedure is given on the double column cash book page.

Posting Three Column Cash Book to Ledger Accounts

The method of posting a three column cash book into ledger is as follows:

The opening balances of the cash book are not posted.

Contra entries are not posted because the double entry accounting for these transactions is
completed within the cash book.
All items on the debit side of the cash book are posted to the credit of respective accounts in
the ledger.
All items on the credit side of the cash book are posted to the debit of respective accounts in
the ledger.
The total of the discount column on the debit side is posted to the debit of discount allowed
account, and the total of the discount column on the credit side is posted to the credit of
discount received account in the ledger.
Example
During May 2016, the John Trading Company made the following transactions:

May 01: Cash balance $2,200, bank overdraft $365.

May 03: Paid J & Co. by cheque $1,200, discount received amounting to $15.
May 05: Received from A & Co. a cheque for $980, discount allowed to them $20.
May 07: Deposited into bank the check received from A & Co. on May 05.
May 10: Purchased stationery for cash, $150.
May 15: Purchased merchandise for cash, $1,300.
May 15: Cash sales for the first half of the month, $2,350.
May 16: Deposited into bank $1,600.
May 18: Cash withdrawn from bank for personal expenses $150.
May 19: Issued a cheque for merchandise purchased, $1,650.
May 21: Drew cash from bank for office use, $650.
May 24: Received a cheque from S & Sons and deposited it into bank, $1,560.
May 25: Paid a cheque to Ali Inc. for $400 and received a discount of $15.
May 27: Purchased furniture in cash for office use, $390.
May 29: Paid office rent by cheque, $450.
May 30: Cash sales for the second half of the month, $4,300.
May 31: Paid salaries by check, $1,760.
May 31: Withdrew cash from bank for office use, $1,470.
Required: Record the above transactions in a three column cash book.

Example
Ade Enterprises started business with a capital of ₦50, 000 paid into the business’ bank
account on 1st Jan 2023. The following are the transactions for the month:
Jan 1: purchase office furniture and equipment by cheque ₦9, 000
Jan 2: purchased goods by cheque ₦6, 375
Jan 3: received cheque of ₦3, 115 from Johnson with a discount of
N34.
Jan 4: purchased stationary with cash ₦388
Jan 5: withdrew cash from bank for office use ₦2, 500
Jan 6: paid rent by cheque ₦3, 000; sold goods for cash ₦2, 365
Jan 7: cash taken to bank ₦4, 337
Jan 8: cash sales ₦2, 787
Jan 9: issued cheque of ₦1, 575 to Bunmi in settlement of her account of
₦1, 675
Jan 10: issued cheque for telephone bills ₦675
Jan 11: received cheque of ₦3, 150 from Dada allowing a cash distance
for ₦ 45
Jan 12: paid cash to bank ₦1, 037
Jan 13: cash sales to lodge to bank ₦3, 125
Jan 14: drew cheques for salary ₦2, 780
Jan 15: paid Bola N3, 562 by cheques with a cash discount of 20%
Jan 16: received cheques from Rotimi ₦2, 467 with a cash discount of
₦63
Jan 17: purchase postage stamp for cash N214
Jan 18: purchased calculator for cash ₦150 but paid ₦750
Jan 29: cash sales ₦1, 217
You are required to prepare a three column cash book for Ade Enterprises for the month of
January, 2023

Example 2
Mr. X started the business in the month of June-2019. X invested a capital of $200,000, in
which the cash contribution is $100,000, and the rest of the $100,000 he deposited in the
business bank account of a business. On June 19, the following transactions took place in the
business. Prepare the necessary double-column Cash Book using the data given below:

Date Transactions
1-Jun Initial capital contribution
. Cash : $100,000 an Bank $100,000
2-Jun Paid for Advertisement $ 500 from check
4-Jun Raw material purchased from Mr. A of $ 10,000 by paying cash
4-Jun Purchased stationery for cash worth $ 550
7-Jun Raw material purchased from Mr. B of $ 20,000 on credit
9-Jun Goods sold to the customer for $15,000 by cash
10-Jun Paid $ 200 for the office expenses in cash
13-Jun Goods sold on credit worth $ 11,000 to Mr. C
15-Jun Received a check worth $ 11,000 for the goods sold on credit on 13-July-2019 to Mr.
C;
18-Jul Raw material purchased $ 10,000 by paying through check
21-Jun Withdrew from bank $ 15,000 for business
25-Jun Goods sold on credit worth $ 5,000
30-Jun Paid rent by check of $ 7,500
30-Jun Paid the salaries to staff of $ 17,000 in cash

The Petty Cash Book (PCB)

The petty cash book is used for recording expenses of smaller amount than those recorded in
the main cash book. It is usually maintained on the imprest system in which a “cash float”
estimated to cover the petty cash payments for a given period (e.g. a week or a month) is
given to the petty cashier. At the end of the period, the petty cashier submits details of the
expenses paid and is reimbursed for that amount by the main cashier. By this system, the
balance with the petty cashier at the beginning of each period will always be equal to the float
given at the beginning. To maintain control over the petty cash, a petty cash voucher must be
filled and approved before the disbursement of any expenditure. The voucher shows details of
the expense, the signature of the officer approving the payment and the signature of the
person receiving the money. Furthermore, a surprise count of cash on hand should be done
occasionally.

Example
Oluwafemi Ltd maintains a petty cash book with a float of N10, 000.
The following transactions took place in the month of July:
₦
July 3: postage stamp purchase 500
July 4: transport fare in delivery parcel 80
July 5: cost of registered letter 50
July 6: Petrol for official car 720
July 6: Advertisement in local paper 560
July 6: Paid for tea and milk for office staff 170
July 7: Travellers order book bought 200
July 8: Postage for parcel 1,000
July 8: Petrol and oil for official 1,130
July 9: Paid office cleaner 750
Prepare the petty cash book for the period ending July 9 with five analysis columns for
postage, stationery & advertisement, motor and travelling expenses, office/sundry expenses
and ledger account.