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Cash Book - Books of Original Entry

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What is a Cash Book?

Definition

A Cash Book is a special journal or book of original entry in which all cash and bank transactions are recorded in chronological order. It serves a dual purpose – it functions both as a journal (book of original entry) and as a ledger account (Cash Account and Bank Account).

The Cash Book is maintained to keep a systematic record of all cash and bank transactions of a business. It records both the debit side (receipts) and credit side (payments). The balance of the Cash Book represents the cash in hand and/or cash at bank at any given point in time.

Key Point

The Cash Book is unique because it eliminates the need to maintain separate Cash Account and Bank Account in the ledger. It acts as both the primary book of entry for cash/bank transactions and the ledger account.

Types of Cash Book

Based on the nature and volume of transactions, Cash Books are classified into four main types:

Single Column Cash Book

This is the simplest form of Cash Book with only one amount column on each side. It records only cash transactions (no bank transactions).

Format:

Receipts (Dr. Side) Payments (Cr. Side)
Date Particulars V.No. L.F. Amount (₹) Date Particulars V.No. L.F. Amount (₹)

Double Column Cash Book (Cash & Bank)

This Cash Book has two amount columns on each side – one for Cash transactions and one for Bank transactions. It records both cash and bank transactions simultaneously.

Format:

Receipts (Dr. Side) Payments (Cr. Side)
Date Particulars V.No. L.F. Cash (₹) Bank (₹) Date Particulars V.No. L.F. Cash (₹) Bank (₹)

Important Points:

  • Cash Column: Records all cash receipts and payments
  • Bank Column: Records all bank deposits and withdrawals
  • Contra Entries: Transfers between cash and bank marked with "C" in L.F.

Three Column Cash Book (Cash, Bank & Discount)

This comprehensive Cash Book has three columns on each side – Cash, Bank, and Discount. It records cash transactions, bank transactions, and discounts (allowed/received).

Format:

Receipts (Dr. Side) Payments (Cr. Side)
Date Particulars V.No. L.F. Discount
Allowed		 Cash Bank Date Particulars V.No. L.F. Discount
Received		 Cash Bank

Petty Cash Book

A special Cash Book for recording small, routine expenses. Works on the Imprest System where a fixed amount is maintained.

Analytical Petty Cash Book Format:

Date Particulars V.No. Receipts Analysis of Payments Total
Postage Stationery Travelling Office Exp. Misc.

Cash Book Totaling and Balancing Procedure

Balancing the Cash Book

Balancing a Cash Book means totaling both sides (debit and credit) and finding the difference to determine the closing balance. This process is typically done at the end of each day, week, or month depending on the volume of transactions.

Step-by-Step Balancing Procedure

Complete guide to totaling and balancing any type of Cash Book

  1. Total the Debit Side: Add all amounts in the cash column on the debit (receipts) side.
  2. Total the Credit Side: Add all amounts in the cash column on the credit (payments) side.
  3. Calculate Closing Balance: Subtract the credit total from the debit total.
  4. Record Closing Balance: Write the closing balance on the credit side as "By Balance c/d".
  5. Equalize Both Sides: Add the closing balance to make both sides equal.
  6. Carry Forward: On the first day of the next period, bring down the balance as "To Balance b/d" on the debit side.

Important Rules:

  • Cash Balance: Can never be negative (credit balance)
  • Bank Balance: Can be negative (overdraft) - shown on debit side in brackets
  • Discount Columns: Not balanced but totaled separately
  • Contra Entries: Do not affect the balancing process

Detailed Example: Single Column Cash Book Balancing

Complete balancing process with calculations

Transactions for January 2024:
  1. Jan 1: Cash in hand ₹25,000
  2. Jan 5: Cash sales ₹15,000
  3. Jan 8: Paid rent ₹8,000
  4. Jan 12: Received from debtor ₹12,000
  5. Jan 15: Paid salaries ₹10,000
  6. Jan 20: Cash sales ₹18,000
  7. Jan 25: Paid electricity bill ₹3,500
  8. Jan 28: Received commission ₹4,000
  9. Jan 31: Paid for stationery ₹2,500

Solution: Balanced Single Column Cash Book

Receipts (Dr. Side) Payments (Cr. Side)
Date Particulars V.No. L.F. Amount (₹) Date Particulars V.No. L.F. Amount (₹)
2024
Jan 1		 To Balance b/d - - 25,000 2024
Jan 8		 By Rent A/c 1 25 8,000
Jan 5 To Sales A/c 2 40 15,000 Jan 15 By Salary A/c 3 50 10,000
Jan 12 To Debtor A/c 4 15 12,000 Jan 25 By Electricity A/c 5 30 3,500
Jan 20 To Sales A/c 6 40 18,000 Jan 31 By Stationery A/c 7 60 2,500
Jan 28 To Commission A/c 8 55 4,000 Jan 31 By Balance c/d - - 50,000
Total: 74,000 Total: 74,000
Feb 1 To Balance b/d - - 50,000
Step-by-Step Calculation:
Debit Side Calculation:

Opening Balance: ₹25,000
+ Cash Sales (Jan 5): ₹15,000
+ Received from Debtor: ₹12,000
+ Cash Sales (Jan 20): ₹18,000
+ Commission: ₹4,000
Total Debit: ₹74,000

Credit Side Calculation:

Rent: ₹8,000
+ Salaries: ₹10,000
+ Electricity: ₹3,500
+ Stationery: ₹2,500
Subtotal: ₹24,000
+ Balance c/d: ₹50,000
Total Credit: ₹74,000

Closing Balance = Total Debit - Total Payments
= ₹74,000 - ₹24,000 = ₹50,000

Double Column Cash Book Balancing

Balancing both Cash and Bank columns separately

Key Points for Double Column Cash Book:
  • Cash and Bank columns are balanced separately
  • Contra entries appear on both sides but don't affect the balancing
  • Cash balance can never be negative
  • Bank balance can be negative (overdraft)
  • Each column must balance independently

Double Column Cash Book Balancing Process

Balancing Procedure for Double Column Cash Book:
  1. Total Cash Columns: Add both debit and credit cash columns separately
  2. Total Bank Columns: Add both debit and credit bank columns separately
  3. Calculate Cash Balance: Debit Cash - Credit Cash = Closing Cash Balance
  4. Calculate Bank Balance: Debit Bank - Credit Bank = Closing Bank Balance
  5. Record Balances: Put closing balances on credit side as "By Balance c/d"
  6. Equalize Totals: Make sure total debit = total credit for each column
  7. Carry Forward: Bring down balances as "To Balance b/d" on the next period

Important:

In Double Column Cash Book, the Cash Column and Bank Column are balanced independently. The totals of debit and credit sides will be equal only when you consider both columns together, but each column must balance separately with its own closing balance.

Three Column Cash Book Balancing

Handling Discount columns along with Cash and Bank

Special Considerations for Three Column Cash Book:
  • Discount Columns: Not balanced, only totaled
  • Discount Allowed: Totaled and posted to Discount Allowed Account
  • Discount Received: Totaled and posted to Discount Received Account
  • Cash and Bank Columns: Balanced separately as in double column
  • The discount totals help in preparing final accounts

Three Column Cash Book Balancing Process

Step-by-Step Procedure:
For Discount Columns:
  • Total the "Discount Allowed" column on debit side
  • Total the "Discount Received" column on credit side
  • These totals are NOT balanced
  • They are posted to respective ledger accounts
  • No closing balance for discount columns
For Cash & Bank Columns:
  • Balance Cash column separately
  • Balance Bank column separately
  • Follow same procedure as double column
  • Record closing balances
  • Carry forward to next period

Remember:

In Three Column Cash Book, only the Cash and Bank columns are balanced. The Discount columns are only totaled and these totals are transferred to the respective ledger accounts at the end of the accounting period.

Common Balancing Mistakes & Solutions

Avoid these errors when totaling and balancing

Wrong Side Entry
Recording receipts on credit side or payments on debit side. Always remember: Receipts on Debit, Payments on Credit.
Arithmetic Errors
Wrong addition or subtraction. Always double-check your calculations and use calculator for verification.
Column Confusion
Mixing up cash and bank columns in double column cash book. Keep separate totals for each column.
Contra Entry Errors
Not recording both sides of contra entries or recording them incorrectly. Mark with "C" in L.F. column.
Balance Carry Forward
Forgetting to bring down the balance or writing it on wrong side. Balance b/d always on debit side for next period.
Discount Column Errors
Trying to balance discount columns or posting them incorrectly. Discount columns are only totaled, not balanced.

Quick Balancing Reference Guide

Cash Book Type Columns to Balance Columns to Total Only Special Notes
Single Column Cash Column None Simple balancing - one column only
Double Column Cash & Bank Columns None Balance each column separately
Three Column Cash & Bank Columns Discount Columns Discount totals posted to ledger
Petty Cash Book Receipts & Total Columns Analysis Columns Works on imprest system

Pro Tip for Perfect Balancing:

Always follow this sequence: Total Debit → Total Credit → Calculate Difference → Record Balance c/d → Equalize Totals → Carry Forward Balance b/d. If totals don't match, check arithmetic first, then verify each entry was recorded on the correct side.

Practical Examples - Cash Book

Let's practice recording transactions in different types of Cash Books with detailed solutions:

Example 1: Single Column Cash Book

Basic Cash Transactions Only

Question: Prepare a Single Column Cash Book from the following transactions for January 2024:
  1. Jan 1: Cash in hand ₹20,000
  2. Jan 3: Cash sales ₹15,000
  3. Jan 5: Paid rent in cash ₹5,000
  4. Jan 8: Received from debtor Ram ₹8,000
  5. Jan 12: Cash purchases ₹10,000
  6. Jan 15: Paid wages ₹3,000
  7. Jan 20: Cash sales ₹12,000
  8. Jan 25: Paid for stationery ₹1,500
  9. Jan 28: Received commission ₹2,500
  10. Jan 31: Withdrew for personal use ₹4,000

Solution: Single Column Cash Book

Receipts (Dr. Side) Payments (Cr. Side)
Date Particulars V.No. L.F. Amount (₹) Date Particulars V.No. L.F. Amount (₹)
2024
Jan 1		 To Balance b/d - - 20,000 2024
Jan 5		 By Rent A/c 1 25 5,000
Jan 3 To Sales A/c 2 40 15,000 Jan 12 By Purchases A/c 3 35 10,000
Jan 8 To Ram A/c 4 15 8,000 Jan 15 By Wages A/c 5 50 3,000
Jan 20 To Sales A/c 6 40 12,000 Jan 25 By Stationery A/c 7 60 1,500
Jan 28 To Commission A/c 8 55 2,500 Jan 31 By Drawings A/c 9 10 4,000
Jan 31 By Balance c/d - - 34,000
Total: 57,500 Total: 57,500
Feb 1 To Balance b/d - - 34,000

Example 2: Double Column Cash Book

Cash and Bank Transactions

Question: Prepare a Double Column Cash Book for February 2024:
  1. Feb 1: Cash in hand ₹25,000; Bank balance ₹50,000
  2. Feb 3: Deposited cash into bank ₹15,000
  3. Feb 5: Cash sales ₹18,000
  4. Feb 8: Paid rent by cheque ₹8,000
  5. Feb 10: Withdrew from bank for office use ₹10,000
  6. Feb 12: Received cheque from Mohan ₹25,000
  7. Feb 15: Deposited Mohan's cheque into bank
  8. Feb 18: Paid salary in cash ₹12,000
  9. Feb 22: Paid to supplier by cheque ₹20,000
  10. Feb 28: Cash purchases ₹8,000

Solution: Double Column Cash Book

Receipts (Dr. Side) Payments (Cr. Side)
Date Particulars V.No. L.F. Cash (₹) Bank (₹) Date Particulars V.No. L.F. Cash (₹) Bank (₹)
2024
Feb 1		 To Balance b/d - - 25,000 50,000 2024
Feb 3		 By Bank A/c - C 15,000 -
Feb 3 To Cash A/c - C - 15,000 Feb 8 By Rent A/c 1 30 - 8,000
Feb 5 To Sales A/c 2 40 18,000 - Feb 10 By Cash A/c - C - 10,000
Feb 10 To Bank A/c - C 10,000 - Feb 18 By Salary A/c 3 50 12,000 -
Feb 12 To Mohan A/c 4 15 25,000 - Feb 22 By Supplier A/c 5 18 - 20,000
Feb 15 To Bank A/c - C - 25,000 Feb 28 By Purchases A/c 6 35 8,000 -
Feb 15 To Cash A/c - C - 25,000 Feb 28 By Balance c/d - - 43,000 77,000
Total: 78,000 115,000 Total: 78,000 115,000
Mar 1 To Balance b/d - - 43,000 77,000

Note on Contra Entries:

Entries marked with "C" in L.F. column are contra entries (transfers between cash and bank). They appear on both sides of the Cash Book.

Example 3: Three Column Cash Book

Cash, Bank and Discount Transactions

Question: Prepare a Three Column Cash Book for March 2024:
  1. Mar 1: Cash ₹30,000; Bank ₹60,000
  2. Mar 3: Received from Kumar ₹19,000 in cash after allowing discount ₹1,000
  3. Mar 5: Paid to Supplier by cheque ₹28,500 and received discount ₹1,500
  4. Mar 8: Cash sales ₹15,000
  5. Mar 10: Deposited cash into bank ₹20,000
  6. Mar 12: Received cheque from Ravi ₹38,000 after allowing discount ₹2,000
  7. Mar 15: Paid wages in cash ₹8,000
  8. Mar 18: Withdrew from bank ₹12,000
  9. Mar 22: Paid to creditor in cash ₹9,500 and received discount ₹500
  10. Mar 28: Deposited Ravi's cheque into bank

Solution: Three Column Cash Book

Receipts (Dr. Side) Payments (Cr. Side)
Date Particulars V.No. L.F. Disc. Cash Bank Date Particulars V.No. L.F. Disc. Cash Bank
2024
Mar 1		 To Balance b/d - - - 30,000 60,000 2024
Mar 5		 By Supplier A/c 1 22 1,500 - 28,500
Mar 3 To Kumar A/c 2 15 1,000 19,000 - Mar 10 By Bank A/c - C - 20,000 -
Mar 8 To Sales A/c 3 40 - 15,000 - Mar 15 By Wages A/c 4 50 - 8,000 -
Mar 10 To Cash A/c - C - - 20,000 Mar 18 By Cash A/c - C - - 12,000
Mar 12 To Ravi A/c 5 18 2,000 38,000 - Mar 22 By Creditor A/c 6 25 500 9,500 -
Mar 18 To Bank A/c - C - 12,000 - Mar 28 By Bank A/c - C - 38,000 -
Mar 28 To Cash A/c - C - - 38,000 Mar 31 By Balance c/d - - - 6,500 77,500
Total: 3,000 114,000 118,000 Total: 2,000 114,000 118,000
Summary:

• Closing Cash Balance = ₹6,500
• Closing Bank Balance = ₹77,500
• Total Discount Allowed = ₹3,000
• Total Discount Received = ₹2,000
• Net Discount Loss = ₹1,000

Example 4: Petty Cash Book

Small Expenses with Imprest System

Question: Prepare a Petty Cash Book on Imprest System (₹5,000) for April 2024:
  1. Apr 1: Received imprest amount ₹5,000
  2. Apr 2: Postage ₹200
  3. Apr 4: Stationery ₹450
  4. Apr 6: Taxi fare ₹300
  5. Apr 8: Tea & refreshments ₹250
  6. Apr 10: Courier charges ₹180
  7. Apr 12: Office cleaning ₹400
  8. Apr 15: Printing ₹600
  9. Apr 18: Local conveyance ₹220
  10. Apr 20: Miscellaneous ₹150

Solution: Petty Cash Book

Date Particulars V.No. Receipts
(₹)		 Analysis of Payments (₹) Total
(₹)
Postage Stationery Travel Office Misc.
2024
Apr 1		 To Cash (Imprest) - 5,000 - - - - - -
Apr 2 Postage stamps 1 - 200 - - - - 200
Apr 4 Stationery items 2 - - 450 - - - 450
Apr 6 Taxi fare 3 - - - 300 - - 300
Apr 8 Tea & refreshments 4 - - - - 250 - 250
Apr 10 Courier charges 5 - 180 - - - - 180
Apr 12 Office cleaning 6 - - - - 400 - 400
Apr 15 Printing charges 7 - - 600 - - - 600
Apr 18 Local conveyance 8 - - - 220 - - 220
Apr 20 Miscellaneous 9 - - - - - 150 150
Total: 5,000 380 1,050 520 650 150 2,750
Apr 30 Balance c/d - - 2,250
May 1 To Cash (Reimbursement) - 2,750 -

Example 5: Mixed Cash Transactions

Various Cash Receipts and Payments

Question: Prepare a Single Column Cash Book for May 2024:
  1. May 1: Opening cash balance ₹35,000
  2. May 3: Received from debtor Amit ₹12,000
  3. May 5: Cash sales ₹22,000
  4. May 8: Paid electricity bill ₹3,500
  5. May 10: Purchased furniture for cash ₹15,000
  6. May 12: Received interest ₹1,800
  7. May 15: Paid salaries ₹18,000
  8. May 18: Cash sales ₹16,500
  9. May 22: Paid rent ₹7,000
  10. May 25: Received from debtor Suresh ₹9,500
  11. May 28: Paid for repairs ₹2,800
  12. May 31: Owner's drawings ₹5,000

Solution: Single Column Cash Book

Receipts (Dr. Side) Payments (Cr. Side)
Date Particulars V.No. L.F. Amount (₹) Date Particulars V.No. L.F. Amount (₹)
2024
May 1		 To Balance b/d - - 35,000
May 3 To Amit A/c 1 15 12,000 May 8 By Electricity A/c 2 30 3,500
May 5 To Sales A/c 3 40 22,000 May 10 By Furniture A/c 4 25 15,000
May 12 To Interest A/c 5 50 1,800 May 15 By Salary A/c 6 55 18,000
May 18 To Sales A/c 7 40 16,500 May 22 By Rent A/c 8 35 7,000
May 25 To Suresh A/c 9 18 9,500 May 28 By Repairs A/c 10 45 2,800
May 31 By Drawings A/c 11 10 5,000
May 31 By Balance c/d - - 47,000
Total: 96,800 Total: 96,800
Jun 1 To Balance b/d - - 47,000

Summary of Cash Position:

• Opening Balance: ₹35,000
• Total Receipts: ₹61,800 (₹12,000 + ₹22,000 + ₹1,800 + ₹16,500 + ₹9,500)
• Total Payments: ₹49,300 (₹3,500 + ₹15,000 + ₹18,000 + ₹7,000 + ₹2,800 + ₹5,000)
• Closing Balance: ₹47,500
• Net Increase in Cash: ₹12,500

Advantages of Cash Book

Maintaining a Cash Book provides numerous benefits for effective financial management:

Prevents Fraud
Regular recording and balancing of cash transactions helps detect any misappropriation or unauthorized use of cash quickly.
Saves Time
Eliminates the need for separate Cash and Bank accounts in the ledger, reducing duplication of work and saving valuable time.
Cash Management
Provides immediate information about cash position, helping in better planning and management of cash resources.
Easy Verification
Cash balance can be easily verified by physical counting, and bank balance can be verified with bank statements.
Dual Purpose
Serves as both a book of original entry and a ledger account, providing complete record of cash transactions.
Trial Balance Ready
Cash and Bank balances from Cash Book can be directly taken to Trial Balance without preparing separate ledger accounts.

Important Points to Remember

Key Rules for Cash Book

  • ✓ Cash Balance: Can never be negative (credit balance)
  • ✓ Bank Balance: Can be negative (overdraft)
  • ✓ Contra Entries: Appear on both sides of Cash Book
  • ✓ Discount Column: Not balanced but totaled and posted to ledger
  • ✓ Opening Balance: Cash always debit, Bank can be debit or credit
  • ✓ Non-Cash Items: Not recorded in Cash Book (depreciation, bad debts, etc.)

Comparison: Cash Book vs Cash Account

Aspect Cash Book Cash Account
Nature Book of Original Entry + Ledger Only a Ledger Account
Recording Transactions recorded from source documents Posted from journal/cash book
Narration Detailed narration provided Brief particulars only
Columns Multiple columns possible Single amount column
Balancing Balanced daily/weekly/monthly Balanced periodically
Verification Can be verified with physical cash Verified through Cash Book

🧩 MCQ Practice

1. Cash Book is both a:

2. The Cash Book records:

3. Which book is known as the primary record of transactions?

4. Petty Cash Book is maintained under:

5. Which book is prepared before posting into ledger?

6. Contra entries are recorded in:

7. Which side of the Cash Book records cash payments?

8. Petty expenses like postage and stationery are recorded in:

9. The Journal records:

10. When cash is deposited into bank, it is a:

11. Which column is NOT present in a simple Cash Book?

12. Purchases Book is used to record:

13. Sales Book does not record:

14. Purchase Returns Book is also known as:

15. The balance of Cash Book is always:

16. Which of the following is recorded in the Journal Proper?

17. The purpose of the Ledger Folio (L.F.) column in the Journal is to:

18. Which transaction will NOT be in a double-column Cash Book?

19. The source document for recording an entry in the Sales Book is:

20. An overdraft in the bank account means the Bank column in the Cash Book will have a:

Lesson Summary

Key Takeaways

The Cash Book is a crucial accounting record that serves dual purposes — as a book of original entry and as a ledger account. Proper maintenance ensures:

  • Effective cash management and control
  • Prevention of fraud and errors
  • Quick access to cash and bank position
  • Simplified accounting process
  • Accurate financial reporting

Master the Cash Book to build a strong foundation for complex topics like Bank Reconciliation, Final Accounts, and Cash Flow Statements.

Next Steps

After mastering Cash Book, proceed to learn:
• Bank Reconciliation Statement
• Other Subsidiary Books (Sales Book, Purchase Book, etc.)
• Ledger Posting and Trial Balance
• Final Accounts Preparation

Practice Questions

Question 1: Single Column Cash Book

Record the following transactions in a Single Column Cash Book:

  1. Started business with cash ₹1,50,000
  2. Purchased furniture ₹40,000
  3. Paid rent ₹15,000
  4. Sold goods for cash ₹50,000
  5. Purchased goods for cash ₹30,000
  6. Paid electricity bill ₹2,500
  7. Received commission ₹5,000

Question 2: Double Column Cash Book (Cash + Bank)

Record the following transactions in a Double Column Cash Book:

  1. Started business with cash ₹2,00,000
  2. Deposited cash into bank ₹1,00,000
  3. Purchased goods for cash ₹40,000
  4. Paid wages by bank ₹15,000
  5. Received cash from customers ₹60,000
  6. Paid rent by cash ₹10,000
  7. Withdrew cash from bank ₹20,000

Question 3: Single Column Cash Book

Record these transactions in a Single Column Cash Book:

  1. Started business with cash ₹1,20,000
  2. Purchased office furniture ₹25,000
  3. Paid rent ₹10,000
  4. Sold goods for cash ₹45,000
  5. Paid salaries ₹20,000
  6. Received interest ₹3,000
  7. Paid electricity bill ₹1,500

Question 4: Double Column Cash Book

Record the following in a Double Column Cash Book (Cash + Bank):

  1. Started business with cash ₹1,50,000
  2. Deposited cash into bank ₹50,000
  3. Purchased goods for cash ₹30,000
  4. Paid rent by bank ₹12,000
  5. Sold goods for cash ₹55,000
  6. Paid wages ₹20,000 (bank)
  7. Received cash from debtor ₹25,000

Question 5: Single Column Cash Book

Record the following in Single Column Cash Book:

  1. Started business with cash ₹2,00,000
  2. Purchased machinery ₹80,000
  3. Paid rent ₹20,000
  4. Sold goods for cash ₹90,000
  5. Paid electricity ₹5,000
  6. Received commission ₹10,000
  7. Paid salaries ₹15,000
  8. Withdrawn cash by owner ₹25,000