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.

To Access the full content, Please Purchase

  • Q1

    Goods purchased on cash are recorded in the:

    Marks:1
    Answer:

    Cash Book

    Explanation:

    When goods are purchased for cash and not on credit then it is recorded in the cash book.

    View Answer
  • Q2

    Cash Book prepared to record little amouns of expenses in seperate columns is called

    Marks:1
    Answer:

    Petty Cash Book

    Explanation:

    Petty cash book is prepared to record the small amounts of expenses in seperate columns.

    View Answer
  • Q3

    To record the cash transactions and to know the balance of cash and cash at bank a businessman maintains

    Marks:1
    Answer:

    Cash Book

    Explanation:

    It is necessary and useful for a business to know continuously the cash or bank balance on hand. For this purpose and for facilitating the record of cash transactions, the cash book is maintained.

    View Answer
  • Q4

    All transactions with the bank are recorded by business in the

    Marks:1
    Answer:

    two column cash book.

    Explanation:
    Two column cash book contains two separate columns for amount, one for the cash and second for the bank. All transactions with the bank are recorded in the bank column of the cash book.
    View Answer
  • Q5

    Advantage of cash book is that

    Marks:1
    Answer:

    It provides information regarding all cash transactions.

    Explanation:

    The main advantage of a cash book is that it provides complete and seperate record of all cash transactions.

    View Answer