The document discusses the cash book, which is a book of original entry used to record all cash receipts and payments. It can take various forms like single column, two column, or three column based on the type of business transactions. The cash book serves as both a journal and ledger. Transactions are first recorded in the cash book and then posted to individual ledger accounts. Preparing a bank reconciliation statement is necessary to reconcile any discrepancies between the bank balance in the cash book and on the bank statement.

1. This presentation is owned by
ABUL KALAM AZAD PATWARY
“for class 9-10[accounting]”

2. 8

3. Cash Book
Cash Book is a sub-division of Journal recording transactions
pertaining to
cash receipts and payments. Firstly, all cash transactions are
recorded in the Cash
Book wherefrom they are posted subsequently to the
respective ledger accounts. The
Cash Book is maintained in the form of a ledger with the
required explanation called
as narration and hence, it plays a dual role of a journal as
well as ledger. All cash
receipts are recorded on the debit side and all cash payments
are recorded on the credit
side. All cash transactions are recorded chronologically in
the Cash Book. The Cash
Book will always show a debit balance since payments cannot
exceed the receipts at
any time.

4. 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.
DEFINITIONS OF CASH BOOK

5. Is "Cash Book" A Journal Or A Ledger?
Generally cash transactions are numerous. What is credit transaction
today will be cash transaction tomorrow. In other words, all credit
transactions are finally settled by cash. If like all other transactions cash
transactions are also recorded primarily in Journal. So the Cash book is
the substitute for the Cash Account. In fact, no separate Cash account is
opened in the ledger; cash book serves the purpose of the cash account.
The entries in cash book are regarded as one aspect of the double entry
system; the other aspect is posted to the ledger in the concerned account.
L.C. Cropper remarked "every entry in the cash book makes one half of a
double entry; the other half of the double entry appears on the opposite
side of some account in the Ledger." From this angle, 'Cash Book is a
Ledger'.
On the other hand, all cash transactions are primarily recorded in the
Cash Book in order of date and thereafter posted to the concerned ledger
accounts. Judging from this angle, 'Cash Book is a Journal'. Thus we see
that a Cash Book is the 'mixture of Journal and Ledger'. According to
Spicer & Pegler, "The cash book is in fact a ledger version, but due to the
huge amount of entries completed in that, it is reserved in a separate
book, this is known as a cash book, which is used also as a book
of principal entry."

7. Kinds of Cash Book:
From the above it can be observed that the Cash Book
serves as a subsidiary books as well as ledger.
Depending upon the nature of business
and the type of cash transactions, various types of Cash
books are used. They are:
a) Single Column Cash Book
b) Two Column Cash Book or Cash Book with cash and
discount columns or double column cash book.
c) Three Columnar Cash Book or Cash Book with cash,
bank and discount columns or treble column cash
book.
d) Petty Cash Book.

8. Single or Simple Column
Cash Book :
This is the simplest form
of Cash
Book and is used when
payments and receipts are
mostly in the form of cash
and
where usually no cash
discount is allowed or
received. But, when
transactions
involving discounts are
effected, it is recorded in a
separate ledger account.
The ruling
of Single Column Cash
Book is as follows:

9. From the above it can be observed that the Single Column Cash Book is
just
like a ledger account. When cash is received, it is recorded on the debit
side, i.e.,
‘Receipts Side’ of the Cash Book, with the date on which the
transaction is effected,
in the ‘Date Column’, the name of the party or the head of a nominal
account, from
whom or for which the cash has been received, in the ‘Particulars
Column’, the receipt number, with which the cash has been received by
the cashier, in the ‘R. No. Column and the money value of the
transaction in the ‘Amount Column’ respectively. The L.F.
(Ledger Folio) column is for entering the reference ledger folio
number when posting to the ledger is made.
Similarly when payment of cash is made, it is recorded on the credit
side, i.e.,
“Payments Side” of the Cash Book, with the date in the ‘Date Column’,
the name of
the party or head of a nominal account in the ‘Particulars Column’, the
voucher
number in the ‘V. No. Column’, and the money value of the transaction
in the
‘Amount Column’ respectively. The voucher represents the supporting
document for all cash payments effected.

10. Positing: Once the cash
book is entered with all
the cash transactions
,posting
of the entries is made to
the respective ledger
accounts subsequently.
For posting,
from the debit side of the
Cash Book, the concerned
accounts are credited and
from
the credit side, the
concerned accounts are
debited.

11. Tow Column Cash Book or Cash Book with Cash and Discount
Columns:
This type of Cash Book is used when cash transactions involving
discount allowed or received are effected. Usually, discount is
allowed when payments are promptly made by the customers and
discount is enjoyed when payments are promptly made by the
business. In this two column Cash Book, instead of only one
column for
cash as in a Single Column Cash Book, one additional column is
introduced, viz.,
‘Discount Column’. The discounts allowed by the business are
entered on the debit
side and discounts received are entered on the credit side of the
Cash Book. The
discount columns as such cannot be balanced since they are
purely memorandum
columns and will not serve the purpose of a ledger account as
cash columns do. To
know the balance of discount columns, separate ledger
accounts, viz., Discount
Allowed Account and Discount Received Account can be
opened.

12. Posting:
The following points should be kept in mind while posting from the
Cash Book is effected.
1. The opening and closing balances should not be posted.
2. From the debit side of the Cash Book, all the concerned accounts are
given credit.
3. From the credit side of the Cash Book, all the concerned accounts are
given debit.
4. While posting cash received from a debtor or cash paid to a creditor,
due care should be taken to credit the personal account with the amount
of both cash and discount allowed or debit the personal account with the
amount of both cash and discount received.
5. Separate accounts should be opened for discount allowed and discount
received. The total of the discount allowed column represents a loss
sustained by the business and the same should be debited to discount
allowed account by writing ‘To sundries’ in the particulars column. The
total of the discount received column represent as gain made by the
business and it should be credited to the discount account by writing ‘By
Sundries’ in the particulars column.

13. Three Columnar Cash Book or Cash
Book with Cash, Bank and
Discount Columns:
Nowadays, every businessman
invariably has a bank account to reap
the advantages of safety, convenience,
credit facilities and less clerical work.
Thus, when a business is maintaining
a bank account, the transactions can
be made
through cheques. Instead of
maintaining the bank account in the
ledger, it is found
more convenient if it is included in the
Cash Book as Cash Column. Thus, the
three
column Cash Book is the resultant
effect where in addition to cash and
discount
columns, bank column is also
included.

14. POSTING
All cash receipts are entered on
the debit side in the cash column
and all cash payments on the
credit side in the cash column of
the Cash Book. Amounts paid
into the bank or deposited are
recorded on the debit side in the
bank column and all
payments made by cheques are
recorded on the credit side in the
bank column.

15. Petty Cash Book:
The word ‘petty’ has its origin from the French word ‘petit’ which
means small. The petty cash book is used to record items like
carriage,
cartage, entertainment expenses, office expenses, postage and
telegrams, stationery, etc. The person who maintains this book is
called the ‘petty cashier’. The petty cash book is used by many
business concerns to save the much valuable time of the senior
official, who usually writes up the main cash book, to prevent over
burdening of the main cash book with so many petty items and to
find out readily and easily information about the more important
transactions.
The amount required to meet out various petty items is estimated
and given to the petty cashier at the beginning of the stipulated
period say a fortnight or a month.
When the petty cashier finds shortage of money, he has to submit
the petty cash book, after making all the entries, to the chief
cashier for necessary verifications. The chief cashier in turn,
verifies all the entries with supporting vouchers and disburses
cash or issues cheque for the exact amount spent.

16. WHAT ARE THE BENEFITS OF PETTY CASH BOOK ?
It is important to have a book to keep a record of
who lent out or landed money and what
expenses so you can balance every month where
money has gone to, who to collect from, and how
much of a check you need to write to cover
expenses. All expenses should keep receipt to be
recorded in ledger showing office, or other
expenses

17. Advantages of a Cash Book
The advantages of a cash book are:
Reliable and proven method of recording all financial transactions
It can save a lot of money by allowing you to do quite a bit of the work –
work that normally your accountant would do
If you have to pay GST (or VAT or Sales Tax) the cash book can be set
up in such a way that the GST (or VAT or Sales Tax etc) amounts are
easily identified in their own column and easily accounted for, to
the Tax Department.
Possible to see how the business is going on a month to month basis by
looking through the cash book and analysing the breakdown of income
and expenses

18. Recording Cashbook Transactions
in Ledger
A responsible business should consistently
balance the cashbook with the monthly bank
statements received from its financial institution
and account for any discrepancies in funds. The
transactions from the cashbook must also be
transferred to the appropriate accounts or
headings within the general ledger. For example,
list cash payments received for services under
the "Assets" section of the ledger. List cash
expenditures for business supplies and other
materials as expenses. The ledger page number
listed in the cashbook helps expedite this
process.

19. DEFINITION AND EXPLANATION OF BANK RECONCILIATION:
From time to time the balance shown by the bank and cash
column of the cash book required to be checked. The balance
shown by the cash column of the cash book must agree with
amount of cash in hand on that date. Thus reconciliation of the
cash column is simple matter. If it does not agree it means that
either some cash transactions have been omitted from the cash
book or an amount of cash has been stolen or lost. The reason
for the difference is ascertained and cash book can be corrected.
So for as bank balance is concerned, its reconciliation is not so
simple. The balance shown by the bank column of the cash book
should always agree with the balance shown by the bank
statement, because the bank statement is a copy of the
customer’s account in the banks ledger. But the bank balance as
shown by the cash book and bank balance as shown by the bank
statement seldom agree. Periodically, therefore, a statement is
prepared calledbank reconciliation statement to find out the
reasons for disagreement between the bank statement balance
and the cash book balance of the bank, and to test whether the
apparently conflicting balance do really agree.

20. HOW TO PREPARE A BANK RECONCILIATION STATEMENT:
To prepare the bank reconciliation statement, the following rules may be
useful for the students:
Check the cash book receipts and payments against the bank statement.
Items not ticked on either side of the cash book will represent those which
have not yet passed through the bank statement.
Make a list of these items.
Items not ticked on either side of the bank statement will represent those
which have not yet been passed through the cash book.
Make a list of these items.
Adjust the cash book by recording therein those items which do not appear
in it but which are found in the bank statement, thus computing the correct
balance of the cash book.
Prepare the bank reconciliation statement reconciling the bank statement
balance with the correct cash book balance in either of the following two
ways:
(i) First method (Starting with the cash book balance)
(ii) Second method (Starting with the bank statement balance)

21. CAUSES OF DISAGREEMENT BETWEEN BANK STATEMENT AND
CASH BOOK:
Usually the reasons for the disagreement are:
1)That our banker might have allowed interest which have not yet
been entered in our cash book.
2)That our banker might have debited our account for any such
item as interest on overdraft, commission for collecting cheque,
incidental charges etc., which we have not entered in the cash
book.
3) That some of the cheque which we drew and for which we
credited our bank account prior to the date of closing, were not
presented at the bank and therefore, not debited in the bank
statement.

22. 4) That some cheques or drafts which we
have paid into bank for collection and for
which we debited our bank account, were not
realized within the due date of closing and
therefore, not credited by the bank.
5) The banker might have credited our
account with amount of a bill of exchange or
any other direct payment into bank and the
same may not have been entered in the cash
book.
6) That cheques dishonored might have been
debited in the bank statement but have not
been given effect to in our books.