Types of Cash Book

Importance of cash book

A business must have strict financial rules and accounting system to perform, record, report and control the cash and banking transactions. Proper recording and accounting of cash and banking transactions are important to achieve the following objectives:

• To have systematic and permanent record of all cash and banking transactions in a separate book.

• To obtain reliable and detailed information of all cash receipts and payments easily and immediately.

• To keep effective control over misappropriation of cash and banking transaction.

• To know the main sources and heads of payment of cash.

• To know cash and bank balances.

• To help to prepare cash budget and to avoid the possibility of having excess or shortage of cash.

• To make the cashier and other concerned officers accountable for all cash and banking transactions.

Types of Cash book

1. Single column cash book
2. Double column cash book
3. Triple column cash book
4. Petty cash book

1. Single column cash book

Single column cash book records only cash receipts and payments. It has only one money column on each of the debit and credit sides of the cash book. All those cash receipts are entered or posted on the debit side and the cash payments are entered or posted on the credit side of the cash book.

While writing a single column cash book, the following points should be kept in mind:

• The pages of those cash book are vertically and equally divided into two parts.
• On the left hand sideof the column, receipts are recorded and on the right hand side of the column, payments are recorded.
• It shows at the top of the left side as "To Balance" or "To Capital" in case of a new business.
• Record the transactions according to the order of date.
• When any amount of cash is been received on the account, then the name of that account is entered in the particulars column by the word "To" on the left hand side of the cash book.
• If any amount is paid on account, the name of the account is written in the particulars column by the word "By" on the right hand side of the cash book.
• It should be balanced at the end of a given period.

Format of Simple cash book

Receipt payment

2. Double column cash book

Cash A/c and Bank A/c are two busiest accounts in ledger and they are removed from the ledger to reduce or decrease the volume and size of a ledger. Cash A/c are removed from ledger and replaced bythe Single Column Cash Book which are to kepp the record of cash transactions. In the same way, no Bank A/c is opened in ledger for recording transactions of bank, but an extra amount of column is provided on each side of 'Single Column Cash Book' for recording bank transactions. One more column for amount is provided on the debit side of single column cash book and one on the credit side of Single Column Cash Book. Those both two amount of columns on debit side and credit side will serve as Bank A/c and so, it will not be necessary to open the Bank A/c in ledger. The Cash Book which has two Amount of the Columns on its both sides is called the 'Double Column Cash Book'.

Advantages:

The following advantages are derived from Double Column Cash Book:

• All the entries thet are made in "Bank" Column of Double Column Cash Book form a part of double entry system and hence a separate Bank A/C need not be opened in ledger.
• It saves our labour, time and the cost.
• Both the cash transactions and the bank transactions are all recorded at the same book. So, both cash balance and bank balance are easily available from the same book. Thus,we can say that the Double Column Cash Book has two accounts in it, the Cash A/C and the Bank A/C.

Contra Entry

In any account, we can only have one half of a double entry. An account cannot be both debited and credited at the equal time. For example, when a person sells goods for cash, and the cash that he or she received will be recorded on the debit side of Cash Book and the goods that are sold will be posted on the credit side of the Sales Account. But, in the Double Column Cash Book, we have two accounts, and they are called Cash A/c and the Bank A/c, and it is not 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 columns.

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, then it is known as the"contra entry". From the Latin word, the meaning of contra is 'opposite to' or 'against'.

In recording such a transaction, the letter "C", is written in 'L.F' column because both the aspects of transactions are clearly recorded and we do not have to post them in the ledger account.

In this connection, the difference between contra entry and other entries in Cash Book may be written. "The Double entry work of the contra entryare all completed in the Cash Book. Theydoes not need to be posted to ledger". But, the double entry work of other entries in Cash Book is not completed, one aspect (that is the cash aspect) of the transaction are completed in Cash Book, but, the other aspect is not completed, which is to be posted to the concerned account in ledger.

3. Triple column cash book

We know, when cash is received from the debtors, discount may be allowed to them and when cash is paid to creditors, discount may be received from them. It means that, the cash and the discount are extremely related with each other. Another thing is that, when the cash is received, the discount is allowed and both cash account and discount account are debited. After that, when the cash are paid and the discount are received and both the cash account and the discount account are credited in the books of account. Thus, in "Double Column Cash Book" another amount or the column are prepared or provided on the each side which is used to record discount allowed and discount received. It means the Cash Book now will have three amount columns on each side, and they are: a.Cash Column, b. Bank Column and c. Discount Allowed Column on the debit side and a.Cash Column, b.Bank Column and c.Discount Received Column on the credit side. It may also be noted that when the 'Discount' Column are addeded with both sides of the Double Column Cash Book, it now becomes a "Treble or Three Column Cash Book". It must be remembered that the Discount Column in Treble Column Cash Book is not an account. Both the account that is Discount Allowed Account and Discount Received Account are opened in the ordinary ledger. These columns are memorandum columns only; they help as remember how much discount has been allowed or received. The total of discount allowed and discount received columns from two sides of cash book are posted in Discount allowed A/c and discount received A/c respectively in the ledger.

Format of three column cash book

Receipt Payment

4. Petty Cash Book

It is another Cash Book which is maintained, mostly , in the huge and large business concerns or tries to reduce or decrease the burden of 'Main Cash Book', in which many transactions involving petty (small) amounts are recorded. For this purpose, a Petty Cashier is hired by Chief Cashier. The Chief Cashier advances the sum of money to Petty Cashier to enable him to meet petty expenses for a fixed period. The Petty Cashier will record this amount on Debit Side of the Petty Cash Book but the Chief Cashier will record that same amount on the Credit Side of the Main Cash Book.

The fundamental difference between the Main Cash Book and the Petty Cash Book is that only two petty expenses are recorded in the Petty Cash Book. No receipt (with the exception of money received from the Chief Cashier) are recorded in it. But, in the main Cash Book, all receipts whether they arer either big or small and large expenses are recorded. Thus, we see that in large organizations both the books are essential, although the importance and needness of the Petty Cash Book are less than the Main Cash Book. Thus, the book in which small payments, which are not convenient to record in the Main Cash Book like postage, muscling expenses, purchase of stationery, etc. are recorded is called Petty Cash Book.

There are two types of petty cash book and they are:

• Simple petty cash book

Format of simple petty cash book

• Analytical petty cash book

(Jogender Goet, Bhesh Raj Banjade, 2012)

Bibliography

goet, J. (2012). Principal of accountinh. kalimati, kathmandu: Dreamland publication.