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Accounting Sub Journals and Cash Book

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




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