What is Cash Book Meaning, Types, and Cash Book Format

A detailed cash book has its own unique way of recording transactions. Keep reading to learn which type would make the most sense for you or your business. Thus, we can say that cash book is the record of all the business transactions in the form of notes or coins, taken place in a particular period. The cash book is called a ledger because of its above-mentioned characteristics.

  • Financial statements including the balance sheet, income statement, and cash flow statement are all based on information from the cash book.
  • It is a crucial tool for controlling cash flow and making sure that every transaction is appropriately recorded.
  • An original entry in a cash book is a record of a financial transaction.
  • This type of cash book is used by businesses who want to track each individual transaction in more detail.
  • Debits represent increases of value or asset accounts while credits represent decreases in value or liability accounts.

Additionally, cash books can be used to create financial statements. These provide a detailed overview of the business’s financial health. Companies need to keep track of their finances using a cash book for these reasons. The balance of cash in a cash book is the total amount of money that is currently in the account. This includes both the money that has been deposited and the money that has been withdrawn.

This type of cash book records transactions of three accounts. It has three columns, one for cash, one for the bank, and another one for discounts. Thus maintaining triple column cash book substitutes, cash account, bank account, and discount accounts.

Cash Book vs. Cash Account

The cash flows will change with every transaction that is recorded in the petty cash book. There are numerous reasons why a business might record transactions using a cash book instead of a cash account. Mistakes can be detected easily through verification, and entries are kept up to date, as the balance is verified daily. By contrast, balances in cash accounts are commonly reconciled at the end of the month after the issuance of the monthly bank statement. A cash book is a separate ledger in which cash transactions are recorded, whereas a cash account is an account within a general ledger.

To use the single-column version of the cash book, transactions are noted in one column. The debit balance of the double column cash book indicates cash in hand and cash at the bank of a particular date of concern. Financial statements including the balance sheet, income statement, https://personal-accounting.org/cash-book-definition-components-and-uses/ and cash flow statement are all based on information from the cash book. We will look at the different cash book types, including single column, double column, single entry and double entry. We will also look at the advantages of using an accounting package for your cash book.

  • If a business uses petty cash, we have developed a petty cash log.
  • A detailed cash book has its own unique way of recording transactions.
  • As before the first three columns in the diagram are the date, transaction description (Desc.), and ledger folio reference (LF).
  • Depending on the size of the business, an organization may have millions of cash or bank entries as receiving from debtors and payment to creditors occur on a daily basis.

Maintaining detailed records of your firm’s cash transactions in a cash book is extremely vital. In addition to serving as an important accounting record, it helps companies in keeping track of their financial position at all times. It also provides updated and relevant data while formulating budgets, making forecasts, and allocating resources, thus, ensuring efficient financial management. An example of this is a business completing a consultancy job for a client. A sales invoice is issued for a customer, including a payment link. The client pays immediately by bank transfer, which is recorded in the software.

How to Set Up a Cash Book

Now that we have covered cash book; read our materials on principles of accounting. There might be a credit balance of the bank column, indicating bank overdraft or excess withdrawn over deposits. The officials entrusted with preparing cash books are seated in a separate room, and the entrance of unauthorized employees is restricted there. For all these features of the cash book, it is called a journal.

Cash is a current asset, and examples of cash transactions can be bank overdraft, money orders, demand deposits. Because the voucher is a notional account, the reduction given is recorded on the debit column of the cash journal, whereas the reduction received is recorded on the credit column. The two columns are matched at the financial year-end, and the ending amounts are shifted accordingly. To explain in simple language, a cash book is a fiscal diary in which all cash earnings and expenditures, involving bank withdrawals and deposits, are recorded.


Again, the three column cash ledger diagram below shows only one side of the cashbook, in this case the left hand receipts side (debit). If the cheque is not deposited into a bank account on the same date, it is treated as cash and, therefore, the amount will appear in cash column. The only exception is that a column is added in a three column cash book to account for bank-related transactions. An original entry in a cash book is a record of a financial transaction.

Account reconciliation

The easiest and simplest cash book meaning is a book that records every cash transaction of the business. A cash book is one of the most important journals among the books of accounts. It easily lets people know the net cash-outflow or inflow of a financial year. All payments and receipts are recorded in chronological order, so it becomes convenient to trace a transaction on a particular date. The organisation, which has to make many transactions, maintains a cash book in two parts, a cash receipt journal and a cash disbursement journal. So that cash receipt and cash payment transactions are recorded separately.

The right-hand side is the debit side which records all the receipts. The left-hand side is the credit side which records all the payment transactions. A cash book is a record of the cash transactions of the business. The main purpose of the cash book is the effective management of cash.

What is Cash Book in Accounting Format, Example, Types

It can be broken down into two words, i.e., ‘cash’ and ‘book’. Cash is a real monetary instrument like currency, i.e., coins or notes used as a medium of exchange for acquiring goods and services. Book refers to a compiled record of the information available in the written or printed form.

Importance of Having a Cash Book

The double-column cash book system has been introduced to avoid complexity in posting bank transactions in the single column cash book. A cash book is kept like a ledger account, with receipts entering the debit column and payments moving to the credit column. Because all currency records are kept in it as they occur, it works as a diary or journal of ledger accounts.

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