CASH BOOKS
Cash Book is a Book in which all cash receipts and cash payments are
recorded. It is also one of the books of original entry. It starts with the
cash or bank balance at the beginning of the period. In case of new
business, there is no cash or Bank balance to start with. It is prepared by
all organizations.
When a cash book is maintained, cash or bank transactions are not
recorded in the Journal, and no cash or bank account is required to be
maintained in the ledger as Cash Book serves the purpose of Cash or Bank
Account.
Cash Book: Types and Preparation
1. Single Column Cashbook.
2.Two/Double Column Cashbook.
3. Three Column Cash book.
1. Single Column Cashbook
A Single Column Cash Book records only cash receipts and cash
payments. It has two sides, namely debit and credit. Cash receipts are
recorded on the debit side i.e. left hand side and cash payments are
recorded on the credit side i.e. right hand side. In this book there is only
one amount column on its debit side and on the credit side.
Example
Enter the following transactions in the Single Column cash book of Ran
Traders. Transactions’ Date, Details and Amounts in (Shs.) for Dec 2022
are as follows;
December 01 Balance Brought Forward 27,500
December 05 Cash received from Nitu 12,000
December 08 Insurance Premium paid 2,000
December 10 Furniture purchased 6,000
December 14 Sold Goods for cash 16,500
December 18 Purchased Goods from Naman for cash 26,000
December 22 Cash paid to Remi 3,200
December 25 Sold Goods to Lukanika for cash 18,700
December 28 Cash Deposited into Bank 5,000
December 30 Rent paid 4,000
December 31 Salary paid 7,000
2. Two/Double Column Cashbook
A double column cash book, also known as a two-column cash book,
consists of two columns on each side to record cash and bank
transactions.
Rather than separating cash and bank accounts, a double column cash
book enables accountants to maintain the two accounts side by side. This
allows for greater convenience when recording transactions. In particular,
we can quickly see overall balances.
Simply by adding a bank column to both sides of a single column cash
book, we can turn it into a double column (or two column) cash book.
Example
Record the following transactions in the Two column Cash Book of M/s
Time Zone for the month of January 2022. Transactions’ Date, Details and
Amounts in (Shs.) are as follows;
January 01 Bank Balance 32,500
01 Cash Balance 12,300
03 Purchased Goods by cheque 5,300
08 Goods Sold for cash 9,500
10 Purchased Stationery by Cheque 5,400
15 Sold Goods and received Cheque 7,900
(Deposited on the same day)
17 Purchased Stationery by Cheque 1,000
20 Cash deposited into bank 10,000
22 Paid Commission 500
24 Cheque given to Mudit 7,000
28 Rent paid by Cheque 3,000
30 Paid Salary 3,500
3. Three Column Cashbook
A three-column cash book, also known as a triple column cash book,
contains three money columns on both the debit and credit sides: one on
each side for recording discount, cash, and bank amounts.
It is customary for businesses to allow discounts for early payments. For
example, if cash is paid early, creditors may receive a discount. On the
other hand, if debtors pay early, a discount may be allowed to them.
It is worth mentioning that the format of a three-column cash book is
similar to that of a two-column cash book. The only exception is that a
column is added in a three column that is on the debit side (Discount
Allowed) and on the credit side (Discount Received).
Example
During May 2022, the Jab Trading Company made the following
transactions Amount in Shs:
May 01: Cash balance 2,200, bank overdraft 365.
May 03: Paid J & Co. by cheque 1,200, discount received amounting to 15.
May 05: Received from A & Co. a cheque for 980, discount allowed to
them 20.
May 07: Deposited into bank the check received from A & Co. on May 05.
May 10: Purchased stationery for cash, 150.
May 15: Purchased merchandise for cash, 1,300.
May 15: Cash sales for the first half of the month, 2,350.
May 16: Deposited into bank 1,600.
May 18: Cash withdrawn from bank for personal expenses 150.
May 19: Issued a cheque for merchandise purchased, 1,650.
