CASH BOOK

CHAPTER 10: CASH BOOK

LEARNING OBJECTIVES

This Chapter would enable you to understand:

Meaning of Subsidiary Books of Accounting

Classification of Subsidiary Books or Sub-division of Journal
Advantages of Subsidiary Books
Meaning and Features of Cash Book:
Kinds or Types of Cash Book
Simple Cash Book or Single Column Cash Book
Cash Book with Cash and Bank Columns or Two-column Cash Book or Double
Column Cash Book
Balancing and Posting of Cash Book
Petty Cash Book

Business transactions are numerous and it becomes difficult to record ail the
transactions in one book of primary entry, i.e., Journal Book. For example, in a
business, many transactions may relate to receipts and payments of cash, sale of
goods and their purchase. It is convenient to maintain a separate book for each type
of transactions—one to record cash transactions, another to record credit purchase
of goods and yet another to record credit sale of goods. Book of this type is called a
book of original entry or primary entry—it is a special form of Journal, a sub-
division of it. Journal entry is not passed for the transactions recorded in such
books. They are directly posted in the ledger accounts.

These books of original or primary entry are also called Special Purpose Books or
Special Journals or Subsidiary Books.
CASH BOOK

CLASSIFICATION OF SUBSIDIARY BOOKS OR SUB-

DIVISION OF JOURNAL

CASH BOOK

To record receipts and payments of cash, including receipts into and

payments from the bank

PURCHASES
BOOK

To record credit purchases of goods.

SALES BOOK

To record the credit sales of goods.

PURCHASES
RETURN BOOK

To record the return of goods previously purchased on credit.

JOURNAL
PROPER

To record the transactions which cannot be recorded in any of the

above books.
CASH BOOK

CLASSIFICATION OF SUBSIDIARY BOOKS OR SUB-

DIVISION OF JOURNAL

Advantages of Subsidiary Books

The use of subsidiary books has following advantages:

Division of Work:
Since in place of one Journal, Subsidiary Books are maintained, accounting work can
be divided among a number of persons.

Specialisation and Efficiency:

When the same work is handled by a particular person for a considerable time, he
acquires expertise in it. He becomes more efficient in handling it. Thus, accounting
activity becomes more efficient.

Saving of Time:
Various accounting processes can be undertaken simultaneously because of the use
of number of books, leading to completing the work timely.

Availability of Information:
Since separate book is maintained for each type of transactions, information
relating to each type is available at one place.

Facility in Checking:
In case, the Trial Balance does not match, locating the error or errors is facilitated
by the existence of separate books. Since the number of transactions is less in each
Subsidiary Book as compared to only one Journal, it is easy to locate the errors.

Responsibility:
Division of work results in assigning a particular job to a particular person. If an
error is committed in recording, responsibility can be easily fixed.
CASH BOOK

In this Chapter we shall discuss Cash Book while other Subsidiary Books shall be
discussed in the next Chapter.

Cash Book is a book of primary entry in which cash and bank transactions are
recorded in a chronological order, i.e., in the order they are entered. Receipts are
recorded on the debit side of Cash Book while payments are recorded on the credit
side. Cash transactions are recorded in the cash column and bank transactions are
recorded in the bank column. It is balanced by deducting total payments from total
receipts to know cash in hand and balance at bank.

Features of Cash Book

1. Only cash and bank transactions are recorded in the Cash Book.
2. Cash receipts and cheques deposited are recorded on the debit side while
cash and cheque payments are recorded on the credit side.
3. It records only one aspect of the transaction, i.e., cash.
4. Cash and bank transactions are recorded in the Cash Book in a chronological
order ,i.e., in order they are entered.
5. It performs the function of both Journal and the Ledger at the same time.

Cash Book—Is it a Subsidiary Book and a Principal Book

Cash and bank transactions are recorded in the Cash Book and on the basis of such
record, Ledger Accounts are prepared. Therefore, Cash Book is a Subsidiary Book.
Also, Cash Book by itself is Cash Account and Bank Account, The balances are
entered in the Trial Balance directly. Cash Book, therefore, is a part of the Ledger
also. Hence, it is also a Principal Book.
Cash Book is, thus, both a Subsidiary Book and a Principal Book

Kinds or Types of Cash Books

Two-column or Double Column Cash Book

Simple Cash Book or Single Column Cash
(Cash Book with cash and bank columns):
Book: For recording cash transactions
. For recording cash and bank transactions
only.

Note: Discount Received, Discount Allowed, and Cancellation of Discount Received or

Discount Allowed (when there is dishonour of cheque) are recorded through Journal
Proper.
In addition to the main Cash Book, firms sometimes also maintain a Petty Cash Book.
CASH BOOK

(1) Simple Cash Book or Single Column Cash Book

Simple Cash Book looks like an account, with one column on each side. On the left-
hand side receipts of cash are recorded and on the right-hand side payments are
recorded. The ruling is as follows:

In the column for:

1. Date: Date of transaction is written.

2. Particulars: Name of the account under which cash has been received or paid is
written. In an existing business, Cash Book starts with the Opening Balance of
cash written on the receipts side as ‘To Balance b/d’. A new business will not
have an opening balance.
3. Voucher No. (V. No.): The document supporting a transaction is called a
Voucher. There are two types of cash vouchers: (1) Receipt Voucher and (2)
Payment Voucher. Generally, a Voucher has a serial number which is written in
this column.
4. Ledger Folio (L.F.): In the column for ‘L.F.’, page number of the Ledger, where
the amount is posted, is written,
5. Amount: The amounts received are written on the Debit side and amounts paid
are written on the Credit side.

Cash Account is a Real Account (Under Traditional Approach) and an Asset Account
(Under Modern Approach). Therefore, at the time of recording cash transactions in
the Cash Book the rule followed is “Debit what comes in and Credit what goes out ”or
“Increases in assets are debited and decreases are credited.” For example, cash is
received from a customer. Cash is debited, i.e., cash is recorded in Cash Column in
the receipts (debit) side of the Cash Book.

Balancing of Single Column Cash Book

Cash Book is balanced like an account. The total of receipts column is bigger than or
equal to the total of payments column. The difference is written on the credit side
as ‘By Balance c/d’. The totals are then entered in the two columns opposite to one
another and then on the debit side, the balance is written as ‘To Balance b/d’ to
show the cash balance in hand in the beginning of the next period.
CASH BOOK

Simple Cash Book or Single Column Cash Book—Some Observations

1. When Cash Book is maintained, Cash Account is not opened in the Ledger.
2. Cash Book is balanced like any other account.
3. It does not record
a. non-cash transactions,
b. cheques received or given and
c. cash discount allowed and received.
4. When an entry is recorded in Simple Cash Book, corresponding entry is
recorded in the Ledger. For example, if Ram pays Rs. 5,000, the receipt
(or debit) entry is passed in the Cash Book and Ram’s Account is credited in
the Ledger.
5. Cash Book will not have a credit balance, i.e., Cash in Hand, because cash
paid cannot exceed Cash in Hand.

Let us take a few transactions and understand how they are recorded in the Single
Column or Simple Cash Book and how it is balanced.

Examples:
(i) Vikas starts a business on 1st April, 2020 and introduces Rs. 50,000 in cash as
capital. Cash received by the firm will be recorded in the Receipts side (i.e., Debit
side) of the Cash Book as follows:
CASH BOOK

(ii) Goods are purchased in cash on 2nd April, 2020 for Rs. 20,000.
Cash is paid by the firm, it will record it in the Payments side (i.e., Credit side) of
the Cash Book as follows:

(iii) Goods are sold in cash for Rs. 30,000 on 3rd April, 2020.
Cash is received by the firm, it will record it in the Receipts side (i.e., Debit side) of
the Cash Book as follows:
CASH BOOK

(iv) Vikas withdraws Rs. 5,000 for his personal use on 4th April, 2020.
Cash is paid by the firm, it will record it in the Payments side (i.e., Credit side) of
the Cash Book as follows:

(v) Rs. 2,000 is paid to the printer for printing Bill Book, Letter Heads, etc., on 5th
April, 2020.
Cash is paid by the firm, it will record it in the Payments side (i.e., Credit side) of
the Cash Book as follows:
CASH BOOK

Likewise each cash transaction is recorded in the Cash Book on the date it is
transacted. Cash Book from 1st April, 2020 to 5th April, 2020 will be as follows:

Illustration 1.

Prepare Single Column Cash Book for the month of April 2020, from the following
transactions of Amitabh of Chennai:
CASH BOOK

Solution.

In the Books of Amitabh, Chennai

CASH BOOK

Explanations.

1. Payment made on 3rd April, 2020 to a creditor is by cheque. Hence, it is not

recorded in Single Column Cash Book.
2. Purchase of goods from U& Co. on 21st April, 2020 is a credit purchase. Hence,
it is not recorded in Single Column Cash Book.
3. Sunil, a creditor is paid Rs. 9,500 after deducting cash discount of Rs. 500. Cash
Discount Received will be recorded through Journal entry. The Journal entry will
be:

4. Cash is collected from Mahesh, a debtor, after allowing him cash discount of Rs.
2,500. Cash Discount

Cash Book (Cash Column) cannot have a Credit Balance

Cash Column in the Cash Book cannot show credit balance because cash
payments cannot exceed cash in hand. At the most it can show nil balance when
cash payments are equal to cash in hand.
CASH BOOK

Mechanics of Posting from Single Column Cash Book

Posting of the debit and credit sides of Single Column Cash Book is carried out as
follows:

Posting of Receipts or Debit Side: Receipts are recorded in the debit side of the
Cash Book and to complete the process of dual aspect they are posted to the credit
side in the respective ledger account by writing ‘By Cash A/c’
For example, the entry for cash received from Mahesh (See last entry of
Illustration 1) on 30th April, 2020 is posted to Mahesh’s Account from the debit
side of Cash Book as follows:

Posting of Payments or Credit Side: Payments are recorded in the credit side of
the Cash Book and to complete the process of dual aspect they are posted to the
debit side in the ledger accounts by entering ‘To Cash A/c’.
For example, the entry for payment of electricity expenses of Rs. 9,000 (See
Illustration 1) on 29th April, 2020 is posted to the Electricity Expenses Account
from the credit side of Cash Book as follows:

Let us take Cash Book with imaginary amounts and observe their posting in ledger
accounts
In the Books of Amrit
CASH BOOK
CASH BOOK

Note: Opening balance shown in the debit side of simple cash book is not posted. In
the same manner, closing balance is also not posted. It is shown in the assets side of
the Balance Sheet.
IMPORTANT NOTES
1. Transactions in which party name is not given, is accounted as cash transaction.
For example: Goods Purchased or Goods Sold, these transactions are accounted
as cash transactions and are recorded in Cash Book.
2. Transactions in which party name is given (e.g., goods purchased from Rahul or
goods sold to Paruij are accounted as credit transactions and are not recorded in
Cash Book.
3. Transactions in which both party name and Cash are given (e.g., goods purchased
in cash from Pawan or goods sold in cash to Anita) are cash transactions

Illustration 2.

Enter the following transactions in a Single Column Cash Book and post them in the
Ledger:

Solution
CASH BOOK

Ledger
CASH BOOK

(2) Two-Column or Double Column Cash Book (Cash Book with Cash
and Bank Columns)
Two-Column Cash Book or Double Column Cash Book is a Cash Book which has two
columns for amount on each side; one column to record cash transactions and the other
column to record bank transactions. Deposit of cheques or cash, issue of cheques and
withdrawal of cash from bank, etc., are recorded in bank column of the Cash Book.
Thus, Two-Column Cash Book represents two accounts, i.e., Cash Account and Bank
Account. Bank Account is an Asset Account as per Modern Approach (Personal Account
as per Traditional Approach) and while recording transactions in the bank column of the
Cash Book, the rule of Debit and Credit applicable to Asset Account, i.e., ‘Increase in
assets is debited and decrease credited (or the rule applicable to Personal Account,
i.e., ‘Debit the receiver and Credit the giver’) is followed.

Thus, for cash deposited into the bank—bank balance increases or bank is the receiver and
therefore is debited in the bank column of the Cash Book. Since cash is deposited into bank,
i.e., cash decreases or cash goes out, cash column is credited in the Cash Book. Similarly, for
cash withdrawn or cheque issued—bank balance decreases and bank would be the giver,
therefore, it is credited in the bank column of the Cash Book. Cash discount may be
received when payment is made by cheque/cash and similarly it may be allowed when
payment is received. Cash discount allowed or received is recorded by passing Journal entry
as follows:

In case, cheque is dishonored discount allowed or received is also written back by-passing
Journal entry in the Journal Proper as follows
CASH BOOK

The ruling of Two-Column Cash Book is as follows:

Balancing of Double Column Cash Book

Cash columns are balanced in the same manner as in the case of a Simple Cash Book.
The process is similar for balancing the bank column.

Bank may allow to withdraw more amount than deposited. If the bank allows the firm
to withdraw more amount than the balance in the account, it is known as Overdraft
or Bank Overdraft. In such a case, total of the bank column on the credit side will
be bigger than the total of debit side. The difference is written on the debit side as
‘To Balance c/d’. Then the totals are written on the two sides opposite one another.
The balance is then entered on the credit side mentioning ‘By Balance b/d’.

ALWAYS REMEMBER
1. Cash Column will either have debit balance or nil balance.
2. Bank Column may have either debit (balance in Bank) or credit balance
(Overdraft).
3. If Cash Book with Cash and Bank Columns is maintained, Cash Account and Bank
Account are not opened in the ledger

Two-Column or Double Column Cash Book—Some Observations

Following points should be noted in respect of Two-Column Cash Book:
When new business is started, proprietor introduces capital in the business.
Capital may be brought in cash and/or by cheque. Amount brought in cash is
written in the cash column (in Receipts side or Debit side) with explanation ‘To
Capital A/c’. Amount brought by cheque is written in the bank column (in Receipts
side or Debit side) with explanation ‘To Capital AJc.’
a. If a new Cash Book is started for an existing business, the opening balance is
written as: ‘To Balance b/d’.
All receipts are written on the receipts side, cash in the cash column and
cheques/ drafts in the bank column. In the particular’s column, the name of the
account under which the payment has been received is written.
CASH BOOK

Payments are written on the payments side, i.e., cash payments in the cash column and
payments by cheques or drafts in the bank column.
In effect, if by a transaction the bank balance increases, the bank column is debited
and if the bank balance decreases, the bank column is credited.
Contra Entry: Contra entries are the entries which affect both cash and bank, i.e.,
balance of one will decrease and the other will increase due to such transactions. Such
transactions are recorded on both sides of the Cash Book, once in the cash column and
once in the bank column. Let us take an example to understand it better,
Cash deposited in Bank Rs. 20,000: In this transaction, Bank Account is to be
debited and Cash Account is to be credited. Debit aspect is recorded in the receipts
or debit side of the Double Column Cash Book in the Bank Column and credit aspect is
recorded in the payments or credit side of Double Column Cash Book in the Cash
Column.
Cash withdrawn from Bank for Office Use Rs. 10,000: In this transaction, Cash
Account is to be debited and Bank Account is credited. Debit aspect is recorded in
the receipts or debit side of the Double Column Cash Book in the Cash Column and
credit aspect is recorded in the payments or credit side of the Double Column Cash
Book in the Bank Column.
CASH BOOK

Contra entries are not posted in the Ledger Account and are marked with the letter
‘C’ written in the L.F. column to indicate that these are contra transactions and are
not posted in the Ledger Account.
Cheque deposited in bank, if returned dishonored, i.e., is not paid, reduces the balance in
bank. The uncollected amount is recorded in the payments or credit side of the Cash
Book in the bank column with name of the party who issued the cheque in the particular’s
column. In other words, when a cheque is received from a customer and deposited in the
bank is returned dishonored, the Customer’s Account is debited and the Bank Account is
credited
If cheque issued by the firm is not paid on presentation, it is recorded in the bank
column in the receipts or debit side of the Cash Book with the name of the party to
whom the cheque was issued.
A cheque received may be given to another party, i.e., endorsed to another party. The
receipt and endorsement of cheque is recorded through a Journal entry because cheque
is not deposited in the Bank Account. For example, cheque for Rs. 25,000 received from
Tarun is endorsed in favour of Charnesh, the Journal entry will be as follows:

Cheques or drafts deposited by customers directly into the bank are entered in the bank
column in the debit or receipts side of the Cash Book.
If the firm pays charges for services to the bank called Bank Charges, it is written in
the payments or credit side of the Cash Book in the bank column.
Cash Discount Allowed or Received are recorded by passing a Journal entry.
Discount may be allowed when the payment is received by cheque. If the cheque is
dishonored, Discount Allowed is written back by passing an entry in Journal Proper.
But, the entry for the amount of cheque is recorded in the Cash Book. Similarly, cash
discount may be received when payment is made by cheque. If the cheque is
dishonored,
Discount Received is written back by passing an entry in Journal Proper. Entry for
the amount of cheque is recorded in the Cash Book.
CASH BOOK

Illustration 3.

Prepare Two-column Cash Book from the following transactions:

CASH BOOK

Solution

Notes:
1. Transactions of March 28 and March 30 are credit transactions. Hence, are not
recorded in Cash Book.
2. Cheque received from Deepak on 18th March, 2020 is dated 23rd March, 2020.
Entry on receiving the cheque on 18th March, 2020 will be recorded in Journal
Proper.'
CASH BOOK

Note: Discount Allowed, Discount Received and cheque received from Deepak but
not deposited will be recorded in the books by passing following Journal entries:
CASH BOOK

Illustration 4.

From the following cash and bank transactions of Gupta Stationery House, Delhi
(Proprietor Pramod), prepare Double Column Cash Book for the month of April:
CASH BOOK

Solution:

In the Books of Gupta Stationary House

CASH BOOK

Notes:
1. Discount Allowed and Discount Received will be recorded by passing following
Journal entries:

3. In this case, there is no information as to the date of deposit of the cheque

received from Subhash against sales. Therefore, it is assumed that the cheque is
deposited on the same date.
CASH
BOOK

Illustration 5.

Record the following transactions of Subash, Kochi in a Two-column Cash Book and
balance the book on 31st January, 2020:
CASH
BOOK
Solution.

In the Books of Subash, Kochi

CASH
BOOK

Notes.
Journal entries for Discount Allowed and Discount Received will be passed as
follows:
CASH
BOOK

Bank Overdraft

Bank overdraft means facility by the bank whereby the firm can withdraw from
bank more amount than it has deposited but up to the limit allowed by the
bank. Amount withdrawn in excess of deposits in the bank is known as bank
overdraft. Bank overdraft has credit balance, i.e., is a liability meaning that
much amount is payable to the bank.
If a business has credit bank balance (i.e., overdraft) in the beginning of a period, it
is shown in the payments or credit side of the Cash Book as ‘By Balance bid'. At the
end of the period, bank column is balanced and if debit side total is short (i.e.,
overdraft), the bank column is balanced by entering ‘To Balance dd’ in the bank
column in the receipts or debit side of the Cash Book. In the beginning of the
following year, it is entered in the payments or credit side of the Cash Book as ‘By
Balance bid’.
Following example (with imaginary amounts) shows the Cash Book with overdraft
balance in the opening and at the closing.
CASH
BOOK
Illustration 6.

Prepare Double Column Cash Book with Cash and Bank Columns from following
information:

Solution.
CASH
BOOK

Illustration 7.
Prepare Cash Book with Bank Column of Bharti, Lucknow from the following
transactions:
CASH
Solution.
BOOK
In the Books of Bharti, Lucknow

Note.Transaction for credit sale of goods on 22nd April, 2020 will not be recorded
in Cash Book.
Entry for cheque-received on 23rd April, 2020 and Discount Allowed wil! be
recorded by passing a Journal entry because it is a post-dated cheque and is not
deposited on the same day. The Journal entry will be as follows:
CASH
BOOK

Illustration 8.

Prepare Two-column Cash Book of Tarun from the following transactions:

CASH
BOOK

Solution.
In the Books of Tarun
CASH
BOOK

Notes.
1. Following Journal entries will be passed to record complete transactions:

2. Goods sold to Mohan on 5th April, 2020 shall not be recorded in the Cash Book, it
being a credit sale.
3. A cheque is received and endorsed in favour of a creditor (April 19), the
transaction is recorded by passing a Journal entry because cheque is not deposited
in the bank or is issued to the third party.
4. Amount to be Deposited in Bank = Rs. 18,090 - (Rs. 4,000 + Rs. 680 + Rs. 2,500 +
Rs. 2,000) = Rs. 8,910.
CASH
BOOK

More than one Bank Account: If a firm has more than one bank account, the bank
column is suitably amended to record bank transactions through different banks
separately. For example, if a business enterprise has two bank accounts, one with
the State Bank of India (SBI) and another with the Punjab National Bank (PNB), the
bank columns on debit side as well as credit side shall be as follows:

Illustration 9.
From the following particulars, prepare a Cash Book with suitable columns:
CASH
BOOK

Solution:
In the books of....

Ledger Posting of Two-Column Cash Book: In order to complete the process of

dual aspect of transactions that are recorded in the Two-Column Cash Book, the
transactions are posted in the respective Ledger Accounts.

Posting of the Receipts or Debit Side: Transactions written in the receipts or

debit side of the Cash Book are posted to the credit side in the Ledger Accounts. In
the ‘Particulars Column’ of the Ledger, ‘By Cash A/c’ is written for cash transactions
and ‘By Bank A/c’ for bank transactions. Amount of the transaction is written in the
‘Amounts Column’.
CASH
BOOK

Posting of the Payments or Credit Side: Transactions written in the payments or

credit side of the Cash Book are posted to the debit side in the Ledger Accounts. In
the ‘Particulars Column’ of the Ledger, ‘To Cash A/c’ is written for cash transactions
and ‘To Bank A/c’ for bank transactions. Amount of the transaction is written in the
‘Amounts Column’.
‘Contra entries’ are not posted in Ledger.
'Contra entries', i.e., transactions between cash and bank are not posted in the
Ledger.
The posting process is illustrated below (Data is imaginary):
CASH
BOOK
CASH
BOOK

Illustration 10.
Prepare Cash Book from the following transactions of Advance Technology, Mumbai
for April, 2020 and post them in the Ledger Accounts:
CASH
BOOK
Note: Transaction of 7th April, 2020 being purchase of goods is a credit
transaction. Hence, will not be recorded in Cash Book.
Journal entries for Discount Received and Discount Allowed are:

Ledger
CASH
BOOK
CASH
BOOK
CASH
BOOK
CASH
BOOK
SYSTEMS OF PETTY CASH
Petty Cash Book may be maintained by Simple (Ordinary) System or by Imprest
System.
Simple System of Petty Cash
In case of Simple System of Petty Cash, Petty Cashier is given appropriate amount
of cash and after spending the amount, he submits the Petty Cash Account to the
Head Cashier.
Imprest System of Petty Cash
Under this system, an estimate is made of amount required for petty expenses for a
period (say for a week, a fortnight or a month). The amount so estimated is given to
the Petty Cashier in the beginning of a period. The amount of petty expenses paid by
the Petty Cashier is reimbursed to him periodically. Thus, he will again have the
fixed amount in the beginning of the new period. This amount is called imprest
money. This system of paying advance in the beginning and reimbursing the amount
spent from time to time is called imprest system.
Advantages of Imprest System of Petty Cash
Control Over Mistakes: The Petty Cash Book is checked by the head cashier at
regular intervals so that a mistake, if committed, is soon rectified.
Control Over Petty Expenses: Petty expenses are kept within the limits of
imprest since the petty cashier cannot spend more than the available petty cash.
Control Over Frauds: Under this system misuse of cash can be minimised since
the Petty Cashier is not allowed to draw cash as and when he desires.
Types of Petty Cash Books

Simple Petty Cash Book Analytical Petty Cash Book

1. Simple Petty Cash Book: A Simple Petty Cash Book is identical with a Cash Book.
Any cash which the Petty Cashier receives is recorded on the left hand side cash
column (debit or receipts column) and any cash which he pays out is recorded on the
right hand side (credit or payments column). The date and particulars of every
transaction is written in the same date and particulars column.
A specimen form of a Simple Petty Cash Book is given below:
CASH
BOOK
Illustration 11.
From the following particulars, prepare Petty Cash Book for the month of April,
2020:

If the imprest amount is Rs. 5,000, show what amount the Petty Cashier would be
entitled to draw in the beginning of the next month.

Solution: PETTY CASH BOOK

CASH
BOOK

2. Analytical Petty Cash Book: An Analytical Petty Cash Book has two sides, left
hand side is used for recording receipts of cash and right-hand side, is used for
recording payments. In this Cash Book, a separate column is provided for recording a
particular item of expenditure, i.e., postage, stationery, advertisement, etc. A
column is usually provided for ‘sundries’ to record infrequent payments. When petty
expense is recorded on the right-hand side total payments column, same amount is
also recorded in the appropriate expense column. At the end of a particular period,
analysis (expenses) column are added and posted to the debit side of the respective
accounts.
Specimen of Analytical Petty Cash Book is given below:

In an Analytical Petty Cash Book, petty expenses are classified into appropriate
heads of expenses. Each head of expense can be conveniently transferred to
appropriate account head in the ledger. Thus, posting from Petty Cash Book becomes
easy.

Balancing the Petty Cash Book

Petty Cash Book is balanced at the end of the month or a specified period. The
columns for payments and expenses are totalled and the total equals the total in the
‘Total Payments Column. Thereafter, the Petty Cash Book is balanced. The method of
balancing the Petty Cash Book is the same as that of a Simple Cash Book.
CASH
BOOK

Difference between Simple and Analytical Petty Cash Book

Illustration 12.
Prepare an Analytical Petty Cash Book on the Imprest System from the following:
CASH
Solution. BOOK
In the Books of
PETTY CASH BOOK
CASH
BOOK
Note: Expenses occurring occasionally are entered in the sundries column and thereafter in
the correct account. On 7th January, the Petty Cashier gets Rs. 5,500 so that Petty Cash
Book balance is Rs. 10,000 again.

Posting the Petty Cash Book

Entries in the Petty Cash Book are posted in the ledger accounts at the end of the specified
period, i.e., month or quarter as the case is. Petty Cash Book is considered as a memorandum
book. The petty expenses are not directly posted to ledger accounts. A Petty Cash Account
is maintained in the ledger.
When Petty Cash is advanced to the petty cashier, the Chief Cashier records it on the
credit side of Cash Book as “By Petty Cash A/c”. At the end of specified period (say a week,
a fortnight or a month), for the total expenses paid a Journal entry is passed by debiting
individual petty expenses and crediting to Petty Cash Account.
All the accounts relating to petty expenses are maintained in the ledger individually. Posting
is made on the debit side of these accounts by writing “To Petty Cash A/c” in the
Particulars Column.
When amount is advanced to the Petty Cashier:
Petty Cash A/c... Dr.
To Cash A/c
On submission of Petty Cash Account by the Petty Cashier:
Expenses A/c... Dr.
To Petty Cash A/c
(Each expense is debited separately with the expenditure incurred during the period as
shown by the Petty Cash Book.)
Thus, in the Ledger, there is a Petty Cash Account as well as separate Ledger
Account for each expense.

In Illustration 12, the Journal entry and the relevant accounts will be as
follows:
CASH
BOOK
CASH
BOOK
CASH
BOOK

Advantages of Petty Cash Book

The advantages of maintaining Petty Cash Book are:

1. Time Saving: Saves the Chief Cashier’s time.
2. Labour Saving: Saving of labour in writing up the Cash Book and posting in the
Ledger.
3. Control: It provides better control over small payments.
4. Convenience in Preparing Ledger Accounts: The totals of expenses are only
taken to post them in the Ledger, No unnecessary details are to be given.
Hence, it is convenient to post these balances directly in the Ledger.
CASH
BOOK

Higher Order Thinking Skills (HOTS) Questions

Q.1. A Rs. 10,000 debit balance brought down in the Cash Book of a firm
means that the firm has Rs. 1.0,000 Cash in Hand. Do you agree?
Q.2. Cash column in the Cash Book cannot have a negative balance, i.e.,
payments cannot be more than cash balance in hand. Why?
Q.3. Why is only one account posted to the Ledger Account from the Cash
Book?
Q. 4. Ranjan, an employee of Jumbo Electronics, deposited in the bank Rs.
40,000 as the previous day’s sale held overnight in the firm’s safe. He has
recorded the transaction in the Cash Book as follows:
In the bank column on Payments side; and in the cash column on Receipts side.
Has he passed the entry correctly?
Q. 5. Bank overdraft is a Liability while bank balance is an Asset. Do you
agree?
Q. 6. Is the balance of Petty Cash Book an asset or income?
CASH
BOOK
Multiple Choice Questions (MCQs)
State which of the following correctly completes the sentences given below:

1. Cash Book records all

a. cash receipts and payments.
b. cash and credit transactions.
c. cash receipts.
d. cash payments.
2. If Ram has sold goods for cash to Param, the entry will be recorded in the
a. Cash Book
b. Sales Book.
c. Journal Proper
d. Petty Cash Book.
3. Ravi has purchased goods for cash from Girish for Rs. 10,000. It will be
recorded in
a. Cash Book.
b. Journal Book.
c. both Cash Book and Journal Book.
d. Petty Cash Book,
4. Mohit paid Rs. 9,800 in settlement of his account of Rs. 10,000. Discount
Allowed will be recorded in
a. Cash Book.
b. Journal Book.
c. Both Cash Book and Journal.
d. Petty Cash Book.
5. Deposit of cash in bank is recorded in
a. Debit of Bank Column and Credit of Cash Column.
b. Debit of Cash Column and Credit of Bank Column.
c. Debit of Cash Column and also Credit of Cash Column.
d. Debit of Bank Column and also Credit of Bank Column.
6. Withdrawal of Cash from Bank is recorded in
a. Debit of Bank Column and Credit of Cash Column.
b. Debit of Cash Column and Credit of Bank Column.
c. Debit of Cash Column and also Credit of Cash Column.
d. Debit of Bank Column and also Credit of Bank Column.
7. Balance in the Petty Cash Book is
a. an expense,
b. a profit.
c. an asset.
d. income.
CASH
BOOK
Multiple Choice Questions (MCQs)
State which of the following correctly completes the sentences given below:
.
8. When a firm maintains Two-column Cash Book, it does not maintain
a. Purchases Book.
b. Journal Proper.
c. Sales Book.
d. Bank and Cash Accounts in the Ledger.
9. Which of the following is not recorded in the Cash Book?
a. Credit Sales
b. Cash Receipts
c. Cash Payments
d. Opening Cash Balance

10. Contra entries on the debt side of the Cash Book are posted to
a. Debit of Bank Account in the Ledger
b. Debit of Cash Account in the Ledger,
c. Credit of Cash Account in the Ledger.
d. Not posted in the Ledger.

11. Which of the following is both a book of Journal and Ledger?

a. Cash Book
b. General Journal
c. Purchases Journal
d. Sales Journal

12. Debit balance of Rs. 10,000 in the Cash Column of the Cash Book shows
that
a. Rs. 10,000 has been paid out.
b. Rs. 10,000 is owing.
c. the amount received exceeds the amount paid by Rs. 10,000.
d. Rs. 10,000 has been credited into the Bank Account.

13. Simple Petty Cash Book is like a

a. Cash Book.
b. Statement.
c. Journal.
d. None of these.

[(i) (a); (ii) (a); (iii) (a); (iv) (b); (ii) (a); (vi) (b); (vii) (c); (viii) (d); (ix) (a); (x)
(d); (xi) (a); (xii) (c); (xiii) (b).]
CASH
BOOK

Very Short Answer Type Questions

.
Q. 1. What is a Cash Book?
Q. 2. What kind of transactions are recorded in the Cash Book?
Q. 3. Name the types of Cash Book.
Q. 4. What is meant by Simple Cash Book?
Q. 5. What is meant by Two-column Cash Book?
Q. 6. Cash column of the Cash Book will always have a debit balance or at the
most nil balance. Why?
Q. 7. Bank column of the Cash Book can have either debit balance or credit
balance. Why?
Q. 8. What is Contra Entry?
Q. 9. Define Bank overdraft.(Delhi 2009)
Q. 10. Which balance of the bank column in the Cash Book signifies bank
overdraft?
Q. 11. To which side of the Ledger Account are the transactions on the
receipts side of the Cash Book posted?

Q. 12. To which side of the Ledger Account are the transactions on the
payments side of the Cash Book posted?

Q. 13. Briefly explain the Petty Cash Book.

Q. 14. Name two types of Petty Cash Book,

Q. 15. State any one advantage of maintaining the Petty Cash Book.(KVS 2010)

Q. 16. What is meant by Analytical Petty Cash Book?

CASH
BOOK

Short Answer Type Questions

1. Why is it necessary to sub-divide a Journal? What are its advantages?

2. Name and describe the various books of original entries.
3. What is a Cash Book? What are the types of Cash Book? How is it balanced?
4. “Cash Book always shows a debit balance.” How far is this statement true and
why?
5. What is a Contra Entry? How is it recorded? Give two examples of a Contra
Entry.
6. State reasons for the following:
a. The balance in the cash column of the Cash Book is always a debit balance
whereas that in the bank column can sometimes be credit,
b. Contra entries in the Two-Column Cash Book are not posted into the Ledger
c. The Cash Account and the Bank Account are not posted in the Ledger.
7. What is a Petty Cash Book? Why is it maintained?
8. Explain the method of posting a Petty Cash Book.
9. Explain the meaning of Imprest System of Petty Cash Book.
CASH
BOOK

PRACTICAL PROBLEMS

Single Column or Simple Cash Book

1. Enter the following transactions of Ripinder in his Single Column Cash Book and
balance it:

[Cash Balance—Rs. 1,27,500.]

CASH
BOOK

PRACTICAL PROBLEMS

Single Column or Simple Cash Book

2. Prepare Simple Cash Book of Gopal from the following transactions

[Cash Balance—Rs. 1,55,350.]

[Hint: Entry of 4th April, 2020 being payment by cheque will not be
recorded in Simple Cash Book.]
CASH
BOOK

PRACTICAL PROBLEMS

Single Column or Simple Cash Book

2. Prepare Simple Cash Book of Gopal from the following transactions

[Cash Balance—Rs. 1,55,350.]

CASH
BOOK

PRACTICAL PROBLEMS

Single Column or Simple Cash Book

3. Prepare Simple Cash Book from the following transactions of Simran

[Cash Balance—Rs. 26,200.]

CASH
BOOK
PRACTICAL PROBLEMS

Single Column or Simple Cash Book

4. From the following prepare Single Column Cash Book of Suresh and post them in
ledger accounts:

[Cαsh Balance—Rs. 2,000; Cash Deposited in Bank—Rs. 11,800.]

CASH
BOOK

PRACTICAL PROBLEMS

Two-Column Cash Book

5. Record the following transactions in Double Column Cash Book and balance the
book on 31st March, 2020:

[Cαsh Balance—Rs. 1,350; Bank Balance—Rs. 39,600.]

CASH
BOOK

PRACTICAL PROBLEMS

Two-Column Cash Book

6. Enter the following transactions in the Double Column Cash Book of M/s. Gupta
Store:

[Cash Balance—Rs. 800; Bank Overdraft—Rs. 5,850.]

CASH
BOOK

PRACTICAL PROBLEMS

Two-Column Cash Book

7. Prepare Two-column Cash Book of Bimal, Lucknow from the following transactions:

[Cash Balance—Rs. 3,000; Bank Balance—Rs. 68,000.]

CASH
BOOK

PRACTICAL PROBLEMS

Two-Column Cash Book

8. Prepare Two-column Cash Book from the following transactions of Mani, Kochi:

[Cash Balance—Rs. 15,500; Bank Balance—Rs. 33, 750.]

CASH
BOOK

PRACTICAL PROBLEMS

Two-Column Cash Book

9. Prepare Two-column Cash Book of Vinod from the following transactions:

[Cash Balance—Rs. 43,850; Bank Balance—Rs. 70,000.]

CASH
BOOK
PRACTICAL PROBLEMS

Two-Column Cash Book

10. Enter the following transactions in the Cash Book of Chandrika:

[Cash Balance—Rs. 94,950; Bank Balance—Rs. 10,30,000.]

CASH
BOOK

PRACTICAL PROBLEMS

Two-Column Cash Book

11. Enter the following transactions in Two-column Cash Book of Reema, and find
cash and bank balances:

[Cash Balance—Rs. 27,000; Bank Balance—Rs. 93,500.]

CASH
BOOK

PRACTICAL PROBLEMS

Two-Column Cash Book

12. Write the following transactions in the Cash Book of Premium Stores, Kolkata
(Proprietor Amrit Kumar)::

[Cash Balance—Rs. 22,700; Bank Overdraft—Rs. 15,400.]

CASH
BOOK
PRACTICAL PROBLEMS

Two-Column Cash Book

13. Enter the following transactions in Two-column Cash Book of Gaurav, Delhi

[Cash Balance—Rs. 2,18,000; Bank Overdraft—Rs. 76,300.]

CASH
BOOK

PRACTICAL PROBLEMS

Analytical Petty Cash Book

14. From the following information, prepare an Analytical Petty Cash Book:

[Petty Cash Balance—Rs. 10,530.]

CASH
BOOK

PRACTICAL PROBLEMS

Analytical Petty Cash Book

15. Rajan maintains a Columnar Petty Cash Book on the Imprest System. The
imprest amount is Rs. 5,000. From the following information, show how his Petty
Cash Book would appear for the week ended 12th September, 2019

[Petty Cash in Hand—Rs. 1,165; Reimbursement—Rs. 3,555.]

CASH
BOOK

PRACTICAL PROBLEMS

Analytical Petty Cash Book

16. A Petty Cashier in a firm received Rs. 15,000 as the petty cash imprest on 4th
June, 2019. During the week, his expenses were as follows:

Write up the Analytical Petty Cash Book and draft the necessary
Journal entries for the payments made.[Petty Cash Balance—Rs. 5,400.]
CASH
BOOK
EVALUATION QUESTIONS: QUESTIONS WITH MISSING
VALUES

1. Determine the missing values of the Cash Book with Bank Column of Mithali on the
basis of following transactions:
CASH
BOOK