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First one is used to record cash transactions; the second is used to record bank transactions and third is used to record discount received and paid. In a single column cash book, receipts will be recorded on the left, and payments or cash disbursement is recorded on the right. This cash book type is also referred to as the triple column cash book. It’s a step up from the double column cash book as it adds a third column on each side.
Apart from
the main cash book, petty cash book may also be prepared to enter the petty
expenses, i.e., expenses involving small amount. 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. A cash book has simplified the entry cash transactions for accounting purpose to a great extent.
What is Cash Balance in a Cash Book?
The cash book is used to record all cash receipts and payments. It contains debits and credits which are double-entry Bookkeeping entries. Debits represent increases of value or asset accounts while credits represent decreases in value or liability accounts.
Amount received from the head cashier is debited in the petty cashbook. All payments are entered on the credit side.The petty cashbook is treated as book of original entry. In Simple Words – Cash transactions are straightaway recorded in the Cash Book and on the basis of such a record, ledger accounts are prepared.
Types of cash book
There is no requirement to transfer balances to the general ledger, but it is required for cash accounts. Cash books have two sides (left-hand side and right-hand side) where all receipts in cash are recorded on the left side, and all payments in cash are recorded on the right side. The amounts for discount allowed and discount received go into two separate accounts from this cash book type. Discount allowed is recorded on the debit side as it represents amounts discounted when customers pay money into the business. The corresponding account for this entry is discount allowed which represents an expense to the business. The discount column on the credit side is discount received, a discount offered to us when we make payments to customers.
Larger companies might choose to divide their cash book into two separate journals – a cash receipt book and a cash disbursement book. A cash disbursement book details all payments made to vendors, and the cash receipt book displays all payments made to the business. Maintaining a detailed cash book is a vital bookkeeping and accounting process that every business should understand and undertake. Cash books help businesses manage their finances efficiently, helping budget for the future by accurately tracking finances as they change. They also allow businesses to access their cash information quicker than going through a general ledger. As already stated, a separate cash account in ledger is not opened when a cash book is maintained.
HR Formats
Thus at the beginning of the next period he once again has the full imprest amount. Keeping in view the quantum of amount involved and frequency of transactions, reimbursement of amount https://personal-accounting.org/capitalization-rate-business-valuation-glossary/ is made on a weekly, fortnightly, monthly basis. Sometimes the petty cash system is operated through the main cash book and in that case petty cash book is not maintained independently.
After knowing the rule for recording a transaction, it is essential for us to learn the procedure for recording the transactions in the simple cash book. It can be observed from the above format that the columns on ‘Receipts Side’ of the cash book are similar to the columns appearing on ‘Payment Side’. We know that cash book is also a cash account and there are two approaches for recording business transactions in the books of accounts. One is ‘Traditional Approach’ and the other is ‘Equation Based Approach. Record cash transactions chronologically, segregate receipts and payments, and ensure accuracy in entries. The three common types of cash books are single-column, double-column, and triple-column.
Information about bill discounting, dishonour, encashment etc is noted in the remark column. The discount column is a memorandum column, figures entered into it are added and not balanced. It refers to loans and advances that have defaulted or are behind on their payments and interest payment remained overdue for a period of 90 days. A voucher is any written documentation that supports the entries reported in the account books and indicates the transaction’s accounting accuracy. Petty cash book is based on the division of labour and works on imprest system; hence, it reduces the work and labour of main cashier.
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- It has three columns, one for cash, one for the bank, and another one for discounts.
- Every time cash, checks, money orders, or anything else is deposited into a bank, the cash book will be debited.
- There are is called contra entries and word ‘C’ is indicated against that item in L.F.
- Similar to simple cash book, cash transactions are recorded in the two column cash book.
The cash expenditures are funded by way of withdrawal of cash from the bank, which would be represented by a contra entry in the two or three-column cash book types. The petty cash book also comes in handy where businesses expect small receipts of cash in the business. It is similar in format to the single cash book type recording receipts on the debit side and payments on the credit side with a single column on each side. Petty cash book is maintained and balanced regularly, perhaps daily by an assigned petty cashier. There are two types of petty cash book management system; the ordinary system and the imprest system. The second column might also be used to record bank account transactions in addition to the cash transactions usually recorded in a cash book.
This is because all cash receipts and payments are recorded in a cash book. Preparing a double column cash book is almost similar to that of the single column cash book. The double-column cash book system has been introduced to avoid complexity in posting bank transactions in the single column cash book.
