What is a Cash Book? Types of Cash Book. - Accountant SkillsDefinition : A cash book is that unique book of accounts which fulfils the objective of both, a journal and a ledger. Like a journal, it is the first book which records all the cash transactions of the business. It also acts as a subsidiary book to post all the cash transactions, similar to a cash account in the ledger. It can be broken down into two words, i. Cash is a real monetary instrument like currency, i. Book refers to a compiled record of the information available in the written or printed form. Thus, we can say that cash book is the record of all the business transactions in the form of notes or coins, taken place in a particular period.
Kinds of Cash Books
A cash book is a financial journal that contains all cash receipts and disbursements, including bank deposits and withdrawals. Entries in the cash book are then posted into the general ledger. A cash book is set up as a subsidiary to the general ledger in which all cash transactions made during an accounting period are recorded in chronological order. Larger organizations usually divide the cash book into two parts: the cash disbursement journal which records all cash payments, and the cash receipts journal, which records all cash received into the business. The cash disbursement journal would include items such as payments made to vendors to reduce accounts payable , and the cash receipts journal would include items such as payments made by customers on outstanding accounts receivable or cash sales.
Meaning of Cash Book. A Cash Book is a special Journal which is used for recording all cash receipts and all cash payments. All cash transactions are first entered in the cash. Practically, the Cash Book is substitute for Cash Account in the ledger. On the debit side all cash receipts and discount allowed are recorded. On the credit side all cash payments and discount received are recorded.
Here we detail about the three types of cash book, i. Simple cash book contains only one amount column on each side debit and credit for recording cash receipts and cash payments. For recording transactions in the simple cash book, the foremost step is to understand the rule for recording transactions i. We know that cash book is also a cash account and there are two approaches for recording business transactions in the books of accounts. 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.
Cash book is the books of original entry which records the cash receipts and cash payments incurred during a particular period. All receipts and payments whether is received through Cheque, Cash, Bank Transfer, Postal order, Bank overdraft are recorded in the cash book. Though cash book is considering as an original book of entry, it is also considered as an integral part of the ledger.
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What is Cash Book
Before talking about the cash book, we would briefly explain what is cash. Cash is a current asset which consists of items used in day to day financial transactions as medium of exchange. In accounting and finance, cash includes, currency notes made of paper, coins, demand deposits, money orders, checks and bank overdrafts etc. The cash balance in a business organization is of significant importance due to the following reasons:. The cash book is used to record receipts and payments of cash.