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