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What is Cash Book Meaning, Types, and Cash Book Format

Many accounting students, utter confusion in understanding the two, in fact, they juxtapose them. However, there is a fine line of difference between cash book and cash account, which we’ve elaborated in the given article. Every business organization, whether a small entity or a large company, needs to maintain and prepare the records of its daily transactions. Sharma Sports Goods Co. follows the imprest system of petty cash under which, Rs 6,000 was handed over to the petty cashier as on 1st March 2011. The total amount spent and the amount reimbursed shall be shown in the total amount column.

  • Details or narration about the source or use of funds are required in a cash book but not in a cash account.
  • If businesses operated on a cash-only basis the single column cash book would be the ideal cash book type.
  • Before talking about the cash book, we would briefly explain what is cash.
  • In one sentence, a cash book is a basic accounting document used for recording deposits and withdraws.
  • This could include money that is received, paid out, and even deposited into or withdrawn from a bank account.
  • The double-column cash book system has been introduced to avoid complexity in posting bank transactions in the single column cash book.

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For a Double Column or Two Column Cash Book, there are two columns to record amount on both sides. One column is to record transactions related to cash, and another column records transactions related to banks. A two-column cash book is prepared when both cash and bank transactions happen in the business. Transactions are recorded in a single column and the total amount of money received or paid out is updated at the end of each day. This type of cash book is mostly used by individuals who are tracking their personal finances.

This includes both the money that has been deposited and the money that has been withdrawn. The cash flows will change with every transaction that is recorded in the petty cash book. Cash Book – Every business activity ultimately result in cash, therefore, recording of transaction involving cash must be recorded in a separate journal. It may be defined as the record types of cash book of transaction relating to receipt of and payment in cash. In business, the use of cash book or a cash account is very common, whether it is a small or a large organization. Cash plays a significant role in the smooth running of the business, so for proper and systematic recording of the cash transactions – companies use either cash book or cash account.

Cash Book FAQs

Read this article to learn about the following types of cash book and its preparation, i.e., (1) Simple Cash Book, (2) Two-Column Cash Book, and (3) Three-Column Cash Book. On the other hand, a Cash Receipts Journal, also known as a Cash Inflow Journal, records all cash the organization receives. It includes cash sales, customer payments, interest income, and other sources of cash inflows. Mr. David started a business ‘David and Sons’ with a Capital of $10000 on 1st April. Following are the transactions made by David and Sons for April 2023.

An original entry in a cash book is a record of a financial transaction. The bank cash book is a type of cash book that is used to track the transactions between a business and its bank. A detailed cash book has its own unique way of recording transactions. Keep reading to learn which type would make the most sense for you or your business. When recording transactions in a cash book, many things need to be considered.

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