A cash book is a book of prime entry (subsidiary books) where cash and bank transactions are first recorded. There are three types of cash book:
Two Column Cash Book
A two column cash book is used to record cash and cheques received and paid during a month. A cash book is the only book of prime entry which is also part of the double entry since cash and cheques received are debited and payments are credited. Rather than keeping the cash account and bank account separately, a cash book enables us to keep these two accounts side by side. It consists of two columns of amount on each side to record Cash and Bank Transactions. Thus, it is more convenient to record and locate cash and bank transactions. It is prepared as follows:
DR CASH BOOK CR | |||||||
Date | Details | Cash $ | Bank $ | Date | Details | Cash $ | Bank $ |
Contra entry in Two Column Cash Book
Example 1
Jan 3 Withdrew cash from bank for business use $ 450
DR Cash Account
CR Bank Account
DR CASH BOOK CR | |||||||
Date | Details | Cash $ | Bank $ | Date | Details | Cash $ | Bank $ |
Jan 3 | Bank ( C ) | 450 | Jan 3 | Cash ( C ) | 450 | ||
Example 2
Jan 8 Put cash into bank $ 780
DR Bank Account
CR Cash Account
CASH BOOK | |||||||
Date | Details | Cash $ | Bank $ | Date | Details | Cash $ | Bank $ |
Jan 8 | Cash ( C ) | 780 | Jan 8 | Bank ( C ) | 780 | ||
Balances in Two Column Cash Book
Worked Example
| ||
Jan | 1 | Cash in hand $ 2 500 |
Cash at bank $ 1 200 | ||
2 | Purchased goods by cash $ 300 | |
4 | Sold goods for cash $ 600 | |
7 | Purchased goods by cheque $ 200 | |
9 | Sold goods for cheque $ 700 | |
11 | Received cheque from Raj $ 1 800 | |
12 | Paid Xavier by cheque $ 800 | |
14 | Received cheque from Sam $ 1 400 | |
17 | Paid Yohan by cheque $1 200 | |
18 | Purchased equipment by cash $ 200 | |
19 | Paid electricity by cash $ 400 | |
20 | Withdrew cash from bank for business use $ 1 300 | |
21 | Withdrew cash from bank for family use $ 600 | |
23 | Purchased equipment for home use $ 350 by cash | |
24 | Cash sales banked $ 3 500 | |
30 | Received cheque from Tamy $ 2 800 | |
31 | Paid cheque to Zidane $ 2 000 | |
CASH BOOK | |||||||
Date | Details | Cash $ | Bank $ | Date | Details | Cash $ | Bank $ |
Jan 1 | Balance b/f | 2 500 | 1 200 | Jan 2 | Purchases | 300 | |
4 | Sales | 600 | 7 | Purchases | 200 | ||
9 | Sales | 700 | 12 | Xavier | 800 | ||
11 | Raj | 1 800 | 17 | Yohan | 1 200 | ||
14 | Sam | 1 400 | 18 | Equipment | 200 | ||
20 | Bank ( C ) | 1 300 | 19 | Electricity | 400 | ||
24 | Sales | 3 500 | 20 | Cash ( C ) | 1 300 | ||
30 | Tamy | 2 800 | 21 | Drawings | 600 | ||
23 | Drawings | 350 | |||||
31 | Zidane | 2 000 | |||||
31 | Balance c/d | 3 150 | 5 300 | ||||
4 400 | 11 400 | 4 400 | 11 400 | ||||
Feb 1 | Balance b/d | 3 150 | 5 300 | ||||
Q1. Prepare a Two column cash book from the following transactions that occurred in the books of Sim. | ||
Jan | 1 | Cash in hand $ 1 500 |
Cash at bank $ 4 200 | ||
3 | Purchased goods by cheque $ 600 | |
5 | Cash sales $ 900 | |
8 | Purchased goods by cheque $ 500 | |
9 | Cash sales banked $ 700 | |
11 | Received cheque from Rajesh $ 2 000 | |
12 | Paid Sahir by cheque $ 900 | |
15 | Received cheque from Sania $ 1 500 | |
16 | Paid Mauree by cheque $1 500 | |
18 | Purchased equipment by cash $ 500 | |
19 | Paid wages by cash $ 600 | |
20 | Withdrew cash for business use $ 1 900 | |
21 | Withdrew cash from bank for family use $ 500 | |
22 | Purchased equipment for home use $ 450 by cheque | |
25 | Sold goods for cheque $ 3 000 | |
30 | Received cheque from Tania $ 2 500 | |
31 | Paid cheque to Zoya $ 2 600 | |
