cashbook subsidiary books

7/31/2019 Cashbook Subsidiary Books

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Cash Book

In any business, there will be numerous transactions relating to cash i.e. receiptsand payments of cash. On receipt of cash, the cash account is debited and onpayment the cash account is credited. Cash Account can be prepared

straightaway without journalizing the transactions. By doing so, much of clericallabor involved in making the journal is saved. Since cash transactions will benumerous, it is better to keep a separate book to contain only the cash account.This book is known as Cash Book.

Types of Cash Book

Single column cash book (Simple cash book)

Cash Transactions are recorded in chronological order Cash receipts on the debit side Cash payments on the credit side Difference is the cash in hand

Double column cash book

Discount and cash columns Only cash discount but not trade discount

Three column cash book

Discount, cash and bank columns

Format of Single Column Cash Book

Simple Cash Book: It is also known as the single column cash book. A simpleCash Book is ruled exactly like Ledger Account.

Thus the format of the Cash book looks like this

Cash Book

RECEIPTS PAYMENTS

Dr Cr

Date Particulars L.F. Amount(Rs.)



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Example of Single Column Cash Book

Example: Enter the following transactions of Rajesh in single Column Cash Book.

2002

Jan. 1. Commenced business with 2, 00,000 2. Paid cash into bank 1,50,000 4. Purchased goods for cash 20,000 4. Sold goods for cash 15,000 5. Paid for stationary 500 7. Received from Arun 25,000 8. Paid to Gopal 10,000

10. Purchased office furniture 4,000 Solution to the Example

Solution:

Cash book

RECEIPTS PAYMENTS Dr. Cr.


Date Particulars L.F Amount

2,00,00015,00025,000

1,50,00020,000500

10,000

4,00055,500

2,40,000 2,40,000

2002Jan.

Feb

147

1

To Capital A/cTo Goods A/cTo Arun A/c

To balance b/d 55,500

2002Jan. 2458

10

31

By Bank A/cBy Goods A/cBy Stationary A/cBy Gopal A/cBy OfficeFurniture A/cBy Balance c/d


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Format of Double Column Cash Book

Normally cash discount is allowed to customers who pay promptly. However, no cashdiscount is allowed unless payment is received from the customer. Similarly, no cashdiscount is received unless payment is made to suppliers. Cash discounts accompanycash receipts from customers and payments to suppliers. Thus, it is convenient torecord discount received or discount allowed with cash payment or cash receipt. Thiscan be done by adding one amount column on each side of the cash book to recorddiscount. Discount allowed is recorded on the debit side and discount received isrecorded on the credit side. One should note that the discount columns are notbalanced but merely totaled.

Format of a double column cash book

Date Particulars LF Discount Cash(Rs)


Format of Triple Column Cash Book

Modern business transactions with a bank are more than cash transactions.Money at bank is as good as cash in hand. Thus it is advantageous to have acolumn for banking transactions on each side of the Cash Book. This column willrecord

Payments into the bank

Payments out of the bank.

Inclusion of bank column in the Cash Book results in three column Cash Book.Payments in cash will be entered in the cash column on the credit side and thereceipts of cash will be entered in the cash column of the debit side. Payments outof bank are represented by the cheques issued by the firm which are entered inthe bank column on the credit side. Payments into the bank are represented bycash or cheques paid into the bank account which are entered in the bank columnon the debit side.

When cash is withdrawn from bank for office use, it is entered in the cash columnon the debit side, saying To Bank and it must also be entered in the bankcolumn on the credit side, saying, By Cash. Similarly, when cash is deposited inthe bank, the amount is entered in the bank column on the debit side and in thecash column on the credit side. These entries are known as contra entries. Theletter C is written in the column of ledger folio (L.F.) to indicate the contratransaction. The double entry is completed in the Cash Book itself.


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As it was said earlier the discount columns are merely totaled and are notbalanced. The other two columns are balanced separately. It should be noted thatthe total in the cash column on the debit side will always be higher than the totalin the cash column on the credit side. The difference is written in the cash columnon the credit side. Such difference represents cash in hand.

Normally, the total of the bank column on the debit side is bigger than the total of the bank column on the credit side. The difference is cash at bank and should bewritten in the bank column on the credit side. However, sometimes it may bepossible that the bank column on the credit side is more than the column on thedebit side. This means that the payments have exceeded the receipts. Thedifference represents money overdrawn, i.e. Bank overdraft. This amount iswritten in the bank column on the debit side. The closing balances become theopening balances for the next period. In case of a bank overdraft, the openingbalance is written in the bank column on the credit side as By balance b/d.

Posting in the Cash Book: The particulars column on the debit side of the CashBook indicates the amount on whose account the money was received. Similarly,the particulars column on the credit side indicates the amount on whose accountthe payment is made. When a person is allowed discount his/her account iscredited with the total of the amount received from him/her and the discountallowed to him/her.

Format of a three column cash book


Bank Date ParticularsLF DiscountCash(Rs)

Bank

Example of Three Column Cash Book

Example:

Prepare a triple column Cash Book from the following transactions of MadhuraEnterprises for the Month of January, 2002.

2002Jan 1 Cash in hand 2,500

Cash at bank 10,002 Paid into bank 1,0005 Brought furniture and issued cheque 2,0008 Purchased goods for cash 500

12 Received cash from Mohinder 980


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Discount allowed to him 2014 Cash sales 4,00016 Paid to Amarnath by cheque 1,450

Discount Received 50

19 Paid into Bank 40023 Withdrawn from bank for private use 60024 Received cheque from Patel 1,490

Allowed him discount 20

28 Withdrawn cash from bank for officeuse 2,000

31 Paid rent by cheque 800

Solution to the Example

Date Particulars LFDis.(Rs.)

Cash(Rs.)

Bank(Rs.)

Date Particulars LFDis(Rs.)

Cash(Rs.)

Bank(Rs.)

20

20

2,500

9804,000

2,000

10,0001,000

4001,430

50

1,000

500

400

7,580

2,000

1,450

- 600

2,000800

5,98040 9,480 12,830 50 9,480 12,830

2002Jan.

12

1214192428

Feb.1

To Balanceb/d

To Cash A/cTo MohinderA/cTo Sales A/cTo CashAccountTo Patel A/cTo Bank A/c

To Balanceb/d

C

C

C

7,580 5,980

2002Jan

25

8161923

283131

By BankBy Furniture

By PurchaseA/cBy AmarnathA/cBy Bank A/cBy DrawingsA/c

By Cash A/cBy RentA/cBy Balancec/d

C

C

C


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Subsidiary Books

The other subsidiary books used in an organization

Purchase Book: Purchases of goods are entered in a register, namely, PurchaseBook. Here, the ruling is that only credit purchases of goods dealt in the firm orraw materials and stores used by the firm are entered in the Purchase Book. Cashpurchases are not entered in the Purchases Book. Also, credit purchases of thingsother than goods and materials have to be dealt with especially in accounts andhence these must not be entered in the Purchase Book. The total of the purchasebook is posted to the debit of Purchases Account. Names of suppliers appear inthe purchase book.

Purchase Returns Book: It is also called Return Outwards Book. A separatebook is maintained to record the purchase returns. The book in which thepurchase returns are entered is the Purchase Returns Book. The total of PurchaseReturns Book is credited to the Purchase Returns Account.

Sales Book: Sales of goods are entered in a register, namely, Sales Book. Onlygoods sales on credit are entered in the Sales Book. Credit sales of things otherthan the goods have to be dealt with especially in accounts; hence, these mustnot be entered in the Sales Book. Cash sales are not entered in the Sales Book.The total of the Sales Book is credited to Sales Account.

Sales Returns Book : The name of the book in which the sales returns arerecorded is called Sales Returns Book. It is also called Returns Inwards Book.The total of Returns inwards Book is debited to Returns Inwards Account.

Bills Receivable Account: The bills receivable of an enterprise consist of promissory notes and bills of exchange. A bill of exchange is a promise to pay theamount specified therein on the expiry of the period for which the bills is drawn.Bill of receivable is treated as the bill receivable by the seller and as bill payableby the buyer. The Bills Receivable book is used to record all promissory notesgiven or bills of exchange accepted by customers.

Bills Payable Account: The bills payable consists of all promissory notes givenor bills of exchange accepted by the business in respect of amounts owe to itssuppliers. The Bills Payable Book is used to record all such promissory notes givenor bills of exchange accepted by the business.

Journal Proper: All those transactions for which no special journal is maintainedare recorded by passing journal entries. The book maintained to record thesetransactions is called journal proper. It is also called general journal.

cashbook subsidiary books

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