Kinds of Cash Books

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A cash book is a subsidiary accounting book that records only cash transactions. Thousands of cash transactions take place in an organization in an accounting year and it is a tedious and meticulous job to journalize them. Cash books are maintained to record the cash-only transactions. A cash book acts as both a journal and a ledger for the cash entries. The cash receipts are recorded on the debit side and all the cash payments are entered on the credit side. 

Cash books can be classified into four different types. Let’s look into detail in the kinds of cash books maintained by a company. 

1. Simple Cash Books

Simple cash books are also known as Single Column Cash Books. They are used to record cash transactions. The cash receipts /(cash that comes in ) are entered on the left side and the cash payments are recorded on the right side. Since all cash transactions are recorded in one book, there is no need for a cash ledger account. There is only one column in the simple cash book to record the cash receipts so the bank transactions and any discounts given are not recorded in this cash book. Bank and discount transactions are recorded in their separate ledger accounts.

It is important to balance the cash books frequently to detect any discrepancy. Many companies balance their cash book daily. A cash book can never have a credit balance and must only have a debit balance.

2. Two Column Cash Books

In two-column cash books, there is an additional column provided for recording the discount entries. This allows the discount transactions to be recorded in the same cash book along with the cash transactions. This cash book is generally maintained by organizations where it is a general practice to give or receive discounts. 

Discount is a nominal account and discount given (loss) is entered on the debit side and discount received (profit) is recorded on the credit side. At the end of the accounting period, both columns are balanced and the closing balances are transferred. 

3. Three Column Cash Books

As the name denotes, three-column cash books have three columns; one for cash, one for the discount, and the additional bank columns. Witty most organizations now dealing with banking instruments like cheques and bills of exchange along with cash, a bank column in the cash book makes the accounting entries simpler and easier to understand.

When a cheque is received and it is deposited in the bank on the same day, an entry is made in the bank column on the debit side. If the cheque is deposited in the bank later and not on the same day then it is recorded as a contra entry. A contra entry is done for transactions between a cash account and a bank account. Although the Cash and Bank balance remain the same, the money just moves from one account to the other. 

4. Petty Cash Book

In every firm, cash transactions take place in all the departments. These cash transactions are recorded in one of the three cash books but sometimes there are many cash transactions that are for very small amounts. Several of such transactions take place in a single day and are called petty cash transactions. Examples of such transactions are expenses for stationery, postage, travel, food, etc.

Since the number of petty cash transactions is very large, a separate cash book is maintained by the firm for them and this cash book is called the petty cash book. The petty cash book is maintained by the petty cashier who also handles the petty cash. A petty cash journal contains a summary of the payments made from the petty cash fund. The totals in this journal are used as the base for a journal entry into a company's general ledger.

Petty Cash Book Format

A petty cash book has a debit and a credit side like a general cash book. All petty cash receipts are recorded on the debit side and all payments are recorded on the credit side of the petty cash book by the petty cashier. The petty cash journal entry is done as a debit to the petty cash account and a credit to the cash account.

FAQ (Frequently Asked Questions)

Q1. Define petty Cash Book and the uses of Petty Cash Book?

Ans. A simple petty cash book is used to record a large number of petty cash transactions. These transactions are large in number but small in amount. A petty cash book is useful as it keeps the small cash transactions separate from the main cash book and is used for recording daily transactions.

Q2. What are the different Types of Petty Cash Books?

Ans. Petty cash books are of two types:

  1. Columnar Petty Cash Book or Analytical Petty Cash Book

Columnar petty cash book is the primary petty cash book in which the money received from the head cashier and the amount of expenditure for a particular period of an organization are recorded in chronological order of dates. The entries are recorded in separate money columns on both sides.

  1. Imprest Petty Cash Book

Under the imprest system of petty cash book, the head cashier provides a fixed amount of money in advance to the petty cashier, for meeting expenditure of a particular period. At the end of this period, the petty cashier submits a statement of expenditures incurred by him to the head cashier. The amount of expenditure in the hands of a petty cashier cannot exceed the amount he receives.