| The accounting procedure, for recording | | | | different persons can carry out the job. |
| information, involves two steps, namely | | | | Cash Book |
| journalizing and posting. It follows that every | | | | In any business, perhaps, the largest number of |
| business must maintain a journal (books of original | | | | transactions of one nature must relate to cash |
| or prime entry) and a ledger (principal book). Thus | | | | and bank. It is so because every transaction |
| the system of book-keeping originally envisages | | | | must, ultimately, result in a cash transaction. Now |
| that all the transactions must be recorded first in | | | | if every cash transaction is to be recorded in |
| the book of original record, i.e., journal and then | | | | journal, it will involve an enormous amount of |
| each transaction so recorded in the journal should | | | | labor in debiting or crediting cash or bank account |
| be posted in the principal book, i.e., ledger. | | | | in the ledger for each transaction. Therefore, it is |
| Subsequently it was experienced that the labor of | | | | convenient to have a separate book, the cash |
| recording each transaction with narration in the | | | | book, to record such transactions. Maintaining of |
| journal and then posting each entry in two | | | | cash book removes the necessity of having cash |
| different accounts in the ledger was enormous. | | | | and bank accounts in the ledger. This book |
| The procedure was more time-consuming and | | | | enables us to know the balance of cash in hand |
| resulted in higher establishment cost. | | | | and at bank at any point of time. |
| It is but natural that in every business most of | | | | Cash book consists of cash and bank accounts |
| the transactions relate to receipts and payments | | | | taken out of ledger and maintained separately; |
| of cash; purchases of goods ;. sales of goods etc. | | | | thus it is a substitute of ledger for cash and bank |
| It was found to be convenient and economical to | | | | accounts. It is also a book of original entry |
| keep separate books to record each particular | | | | because cash and bank transactions are not |
| class of transactions. Each separate book meant | | | | recorded in any other subsidiary book. |
| to record transactions of a particular class is the | | | | |
| book of original or prime entry. It is also known as | | | | Types of cash books |
| sub-journal or subsidiary book. The system under | | | | The type of cash book to be used by any |
| which transactions of similar nature are entered in | | | | business will depend upon its nature and |
| the relevant' subsidiary book and on the basis of | | | | requirements. It may be anyone of the following: |
| which ledger is written is known as the 'practical | | | | (1) Single column cash book (cash column). |
| system of book- keeping'. This system reduces | | | | (2) Double column cash book (cash and discount |
| labor and time of recording the transactions as | | | | columns). |
| impersonal accounts, viz., sales account, purchases | | | | (3) Triple column cash book (cash, discount and |
| account etc., receive the posting of totals and not | | | | bank columns). |
| of individual transactions. However, this system | | | | (4) Bank cash book (bank and discount columns). |
| also conforms to the basic rules of the double | | | | Generally, each business will use anyone of the |
| entry system. | | | | above types of cash book along with "petty |
| Generally the following subsidiary books are used | | | | cashbook" which is maintained on memorandum |
| in the business: | | | | basis. |
| (1) Cash book : records receipts and payments of | | | | Distinction between cash A/c and Cash book |
| cash including transactions relating to bank; | | | | Actually cash book is a perfect substitute of cash |
| (2) Purchases book: records credit purchases of | | | | account. In both, cash transactions are recorded |
| goods meant for sale or for conversion into | | | | date wise in order of occurrence. Cash balance as |
| finished goods; | | | | on any date can be ascertained by balancing both |
| (3) Returns outwards book: records return of the | | | | on any day desired. Yet there are some |
| goods to the suppliers due to several reasons; | | | | differences between the two as given below: |
| (4) Sales book: records credit sales of the goods | | | | Cash account |
| dealt in by the business; | | | | 1. Is an account in the ledger. |
| (5) Returns inwards book : records the return of | | | | 2. Cash account is part of the ledger. Cash |
| goods by the customers to the business ; (vi) Bills | | | | account is opened in the ledger in which posting is |
| receivable book: records the receipts of bills of | | | | done from some book of original entry i.e. journal |
| exchange, promissory notes and hundies of | | | | 3. In cash account posting is not followed by |
| various parties; | | | | narration. |
| (6) Bills payable book: records the issue of bills | | | | 4. It only records one aspect of transaction |
| exchange, promissory notes and hundies to the | | | | involving cash and bank. |
| various parties: | | | | Cash book |
| Advantages of sub-journals | | | | 1. Is a separate book of accounts forming part of |
| (1) It results in saving of time by (a) enabling the | | | | accounting system. |
| recording procedure to be carried on | | | | 2. Cash book records entries directly from |
| simultaneously in different subsidiary books and | | | | transactions and these is no need for a book of |
| (b) by posting the periodical totals in the | | | | prime entry. |
| impersonal accounts. | | | | 3. In cash book entries are followed by narration |
| (2) It makes information available regarding each | | | | also. |
| particular class of transactions. | | | | 4. It records both the aspects of this transaction |
| (3) At the time of preparing trial balance the | | | | in cash and bank columns to complete double |
| checking is easier because books being many, | | | | entry posting. |