Cash Book

  • Books of Original Entry are also known as Books of Prime Entry or Special Purpose Subsidiary Books.
  • All cash receipts, cash payments and transactions through bank are recorded in the cash book.
  • It serves purpose of cash and bank account and there is no need to prepare a separate ledger account.
  • Three types of cash books are single column cash book, double column cash book and triple column cash book.
  • Single column cash book itself is a cash account. Rule of real account is applied, i.e. debit what comes in and credit what goes out.
  • Double column cash book is divided into two parts. It has discount column on both sides. Debit side is used to record discount allowed and cash receipts in their respective columns. Credit side is used to record discount received and cash payments in their respective columns.
  • Triple column cash book is divided into two parts. It has three columns on each side. Left side is used to record discount allowed, cash receipts and bank receipts in their respective columns. Right side is used to record discount received, cash payments and bank payments in their respective columns.
  • In case of overdraft, cash drawn from bank exceeds the amount of deposit. Credit balance in bank column shows overdraft taken from the bank.
  • Contra entry is recorded on both sides of cash book. Cheque deposited on same day is recorded in bank column on debit side of cash book. Endorsement of cheque will not be entered in the cash book.
  • Dishonor of cheque is recorded in bank column on the credit side of cash book with the name of cheque issuing party.  
  • Two types of discount are trade discount and cash discount. Trade discount is given from the list price to increase sales and cash discount is given for making the prompt payment. Only cash discount is recorded in the cash book.

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