Definition and Explanation of Cash Book:
Learning Objectives:
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Define and explain cash book.
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How a cash book is balanced.
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Prepare a format of the simple cash book.
Cash book is a book of original entry
in which transactions relating only to cash receipts and payments are
recorded in detail. When cash is received it is entered on the debit or left
hand side. Similarly, when cash is paid out the same is recorded on the
credit or right hand side of the cash book.
The cash book, though it serves the purpose of
a cash book of original entry viz., cash journal really it represents the
cash account of the ledger separately bound for the sake of convenience. It
is more a ledger than a journal. It is journal as cash transactions are
chronologically recorded in it. It is a ledger as it contains a classified
record of all cash transactions. The balances of the cash book are recorded
in the trial balance and the balance sheet.
Vouchers:
For Every entry made in the cash book there
must be a proper voucher. Vouchers are documents containing evidence of
payment and receipts. When money is received generally a printed receipt is
issued to the payer but counterfoil or the carbon copy of it is preserved by
the cashier. The copy receipts are called debit vouchers, and they support
the entries appearing on the debit side of the cash book. Similarly when
payment is made a receipt is obtained from the payee. These receipts are
known as credit vouchers. All the debit and credit vouchers are
consecutively numbered. For ready reference the number of the vouchers are
noted against the respective entries. A column is provided on either side of
the cash book for this purpose.
Balancing Cash Book:
The cash book is balanced at the end of a
given period by inserting the excess of the debit on the credit side as "by
balance carried down" to make both sides agree. The balance is then shown on
the debit side by "To balance brought down" to start the next period. As one
cannot pay more than what he actually receives, the cash book recording cash
only can never show a credit balance.
Format:
The following is the simple format of a cash
book:
|
Date |
Particulars |
L.F. |
Amount |
Date |
Particulars |
L.F. |
Amount |
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