1. Simple Cash Book:
This is the simplest form of Cash Book and is used in businesses where payments are made and received mostly in cash and where usually no cash discount is received or given. However, if there are any discount or cheque transactions, it is recorded in a separate account in the ledger. The ruling of a Simple Cash Book is like an ordinary cash account.
All the items on the debit side of the Cash Book are posted to the credit and those on the credit side are posted to the debit side of the respective ledger accounts affected. The Cash Book is balanced regularly, mostly daily and the balance should be equal to cash in hand. The cashbook will always show debit balance only.
Enter the following transactions in a Cash Book:
2. Two-Column Cash Book:
This type of cashbook has two columns, viz., cash column and discount column. Usually cash discount is allowed or received when payment is made. So, it is necessary to record this fact at the same place where the cash transaction is recorded.
This type is similar to Simple Cash Book, except that one additional column on each side is provided for recording cash discount. As discount is a nominal account, discount allowed being a loss is shown on the debit side and discount received being a gain is shown on the credit side.
Enter the following transactions in a Double Column Cash Book:
Note. Transaction on 18th March is omitted because it is a credit transaction [credit purchases].
3. Three-Column Cash Book:
In modern times, banking habit has become so widespread and is so convenient and safe that a large number of payments of big concerns are made and received through cheques. In such cases, the Cash Book with bank column in addition to the cash and discount columns is found convenient. Such type of cashbook is known as three-column cashbook. In such a Cash Book, cash columns and bank columns represent cash a/c and bank a/c respectively.
When a transaction affects both the sides of the Cash Book, such a transaction is entered on both the sides and is called as contra entry. For example, when cash is deposited into bank, it is entered in the debit side of the Cash Book by writing “To Cash” and entering the amount in the bank column.
The other entry is on the credit side by writing “By Bank” and entering the amount in the Cash column.
When the cash is withdrawn from the bank, the reverse entry is made, i.e., by writing “To Bank” in the debit side and entering the amount withdrawn in the cash column and the other entry is on the credit side by writing “By Cash” and entering the amount in the bank column of the Cash Book. Entering the letter “C” in the L.F. column indicates such entries.
As the double entry is complete for such transactions in the Cash Book itself, no further posting is required in the ledger.
Rules for recording transactions in the Cash Book:
1. All items of cash receipts are entered in the cash column of the receipt side; cash payments in the payment side. Discount allowed on the debit side and discount received on the credit side of the Cash Book [in the discount columns].
2. When cheques are received from customers and deposited immediately they are entered in the bank column of the Cash Book [debit side]. If they are sent to the bank at a later date, it becomes deposit of money into bank and, therefore, a ‘contra’ entry.
It is shown on the bank column on the debit side and cash column on the credit side.
3. If cheques are received by the business and endorsed to creditors, they are taken into cash columns as cash receipt and cash payment.
Enter the following transactions in a three-column Cash Book and find out the balances as on 16th January, 2002:
Make out a Cash Book with discount, cash and bank columns.