What is a Cash Book Definition, Explanation and Types

types of cash book

Also called a simple cash book, the single cash column records cash payments on the debit side (left side) and cash receipts on the credit side (right side). The entries about bank transactions and ledgers are on separate ledgers. Next, the two-column cash book has a debit and credit on each side. One column contains cash transactions, while the extra column notes transactions concerning discounts allowed or received. Discounts allowed are placed on the debit side, while discounts received will be on the credit side (they are an income). Then, the three-column cash book is the most detailed and comprehensive.

Understanding how that process works with a cash book can help business owners ensure the accuracy of cash transactions. Cash books contain all cash receipts and payments and bank deposits and withdrawals. A cash book is a separate collection of accounts in which all of the company’s cash transactions are entered based on corresponding dates.

Types of Cash Book

On the other hand, a Cash Receipts Journal, also known as a Cash Inflow Journal, records all cash the organization receives. It includes cash sales, customer payments, interest income, and other sources of cash inflows. A Cash Disbursement Journal, also known as a Cash Outflow Journal, records all cash payments made by the organization. It includes payments for various expenses such as salaries, utilities, suppliers, and other operating costs. We have all seen that diary our local shopkeepers use to jot down each item they sell daily.

Cash is a current asset which consists of items used in day to day financial transactions as medium of exchange. In accounting and finance, cash includes currency notes made of paper, coins, demand deposits, money orders, checks and bank overdrafts etc. The three common types of cash books are single-column, double-column, and triple-column. The amount column tracks the monthly balance they allocate to petty cash expenses. On 1st January 2023, Matt Company started its business ‘Matt’s Textile’ with $10000.

Types of Cash Books

The total debt discount column and the total credit discount column are treated as separate balances. The cash book is called a ledger because of its above-mentioned characteristics. Cash book is both journal and ledger as it contains all journal and ledger features and serves purposes of both. All the receipts are recorded on the receipt sides, and all cash disbursements are recorded on the payment side of the cash book. The balance of the cash book is included in the trial balance like a regular ledger account. It also acts as a part of the ledger because it contains cash and bank accounts.

  • The cash column denotes the money you have in your hands, like the actual cash you hold.
  • Among the financial transactions of concern, cash transactions carry much more importance.
  • Triple-column cash books have two columns similar to the double-column cash book.
  • Cash and cheques deposited in the bank are recorded in the bank column of the debit side, and payment by cheques are recorded in the bank column of the credit side.
  • A triple-column is an extended version of the double-column cash book.

Depending on the user, petty cash books can follow a single, double, or triple column format. Cash books record all transactions for cash, checks, money orders, or postal orders. Bank statements are lists of entries for each account holder that has been made in their personal accounts. Most businesses use a two or three-column cash book to note any transactions made through a bank account. Every time cash, checks, money orders, or anything else is deposited into a bank, the cash book will be debited.

Double Column Cash Book

A cash book is a financial journal that contains all cash receipts and disbursements, including bank deposits and withdrawals. Entries in the cash book are then posted into the general ledger. It acts as a journal or book of prime entry because all cash transactions are recorded in it as and when they take place. Because the cash book is updated continuously, it will be in chronological order by transaction. In the description column, the accountant writes a short description or narration of the transaction. In the reference or ledger folio column, the accountant inputs the account number for the related general ledger account.

types of cash book

Based on advances in the banking industry, most firms deal in checks. Meaning the presence of a bank column in a cash book is helpful in understanding transactions. A Cash Book is an Original Entry (or Prime Entry) book in which all cash and bank transactions are documented chronologically. When the business is small, it is easy to record every transaction in a single book called a ‘Journal’. But gradually when the business expands, it becomes inconvenient to record such a large number of transactions in a single book. As a result, a separate book is required for recording cash transactions.

Cash Book: Meaning, Types, and Example

The general cash book is subdivided into the single column, double column, and treble column cash book. They serve as a general ledger and a journal requiring details about the funds’ source or use. Daily balances are easy to access and gauge, mistakes are detectable, and entries are kept up to date in cash books. Generally, cash books consist of two types – a general cash book and a petty cash book. But, there are three other types that companies use more often to handle cash dealings.

The entries related to receipt and payment of cash are first recorded in the cash book and then posted to the relevant ledger accounts. Moreover, a cash book is a substitute for cash account in the ledger. A company that properly maintains a cash book does not need to open a cash account in its ledger. Cash transactions are abundant, and numerous companies use cash books to keep track of all their dealings.

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