Cash is a current asset which consists of items used in day to day financial transactions as medium of exchange. In order to maintain all the cash transactions in one place , a cash book is used.
A Cash book is a subsidiary book which records only one type of transactions – cash transactions.
A company that properly maintains a cash book does not need to open a cash account in its ledger.
Thus, we can say that cash book is the record of all the business transactions in the form of notes or coins, taken place in a particular period .
TYPES OF CASH BOOK
There are four types of cash books used for accounting purposes which are listed below :
- SINGLE COLUMN CASH BOOK – Also known as simple cash book, this cash book is used to record only the cash transactions. The cash coming in (receipts) will be on the left and the cash payments will be on the right. It has only one column , hence bank and discount transactions are not recorded in this book but in separate ledger accounts.
- DOUBLE COLUMN CASH BOOK – Also known as Two Column cash book, in this book there is an additional column for discounts. So both discounts received and the discount that is given is recorded in this book.
Discount being a nominal account the discount provided is placed on the debit side of the cash book while discount received is placed on the credit side of the cash book. At the end of the accounting period, both the columns are balanced, and the closing balances are transferred appropriately.
- TRIPLE COLUMN CASH BOOK – This cash book has the cash, the discount and additionally the bank columns in it. Thus, it substitutes the creation of cash account, bank account, discount received and discount allowed in the ledger.
- PETTY CASH BOOK – The small cash transactions taking place a significant number of times daily if recorded in a general cash book may make it bulky and difficult to handle.
Therefore , such petty transactions are recorded in a separate book called Petty cash book and the person responsible for maintaining it, is called a petty cashier. Example of such transactions – postage, tea, stationery etc.
ADVANTAGES OF CASH BOOK –
- It helps in detecting any cash frauds in the organisation.
- The cash transactions are recorded promptly in a cash book daily, which helps in maintaining a regular record of the cash receipts and payments.
- It avoids the journalization of huge cash transactions.
- Cashbook minimizes time and labor in preparing the ledger as it performs both the journal and ledger functions.
Thus, in simple words the primary book in which transactions regarding cash receipts and payments are recorded in chronological order of dates is called Cash Book & it serves multiple business purposes like reporting, accounting, taxation, cash flow, etc.