Maintaining Cash Book, Posting and Balancing

In the case of a new business the amount will be written in the cash column if the cash is introduced and in the bank column if it is directly deposited in the bank with the words, “To Capital Account” on the debit-side of the cash book. In the case of a continuing business the opening balances are written as “To Balance b/d” Receipt side of the cash book. (Dr. Side)

It is used to record all receipts both in cash and by cheques as also to record the discount allowed to our debtors while receiving the payment. Cash receipts are entered in the cash column whereas amounts received by cheques are entered in the bank column; (It is always advisable to follow the practice of crossing all cheques received as “Payees A/c only” and to be sent to bank for collection. This provides safeguard against possible embezzlement) and discount allowed in the discount column.

Posting from the debit side of the cash book

It is to the credit of the respective accounts-in case if personal account credit is to be given for cash or cheque received plus discount allowed. At periodical intervals cash and bank columns will be balanced and the balance will be carried down to the next period whereas discount column will be to totaled and posted to the debit side of “Discount Allowed” account to be maintained in the ledger.

Payment side of the cash book (Cr. Side) is used to record all payments both in cash and through cheques as also to record the discount received or availed by us from our creditors while making payment to them. Cash payments are recorded in the cash column, payments through cheques are entered in the bank column and discount received in the discount column.

Posting from the credit side of the cash book

It is to the debit of the respective account-in case of personal accounts debit is to be given for the total of the payments made and discount received. At periodical intervals the discount column will be totaled and posted to the credit of “Discount received account” in the ledger.

Balancing

The cash columns are balanced exactly in the same manner as explained in the case of single column cash book. Discount columns are totaled but not balanced. Bank columns are also balanced just like cash columns.

Since the banks allows overdraft therefore it is possible for, the business to withdraw more than the amount deposited. In such a case the total of the bank column on the credit side will be bigger than the one on the debit side. The difference is written on the debit side as “To Balance c/d”.

Bank (Cash Book) A/c

Whenever cash is being handled by the employees there is always danger that employees might embezzle cash. In order to minimize this risk many of the business units follow this policy:

(1) All cash received is deposited in the bank intact i.e.. no part of the cash received is used for meeting day-to- day payments;

(2) All cheques received are also sent to the bank for collection;

(3) All payments are to be made by the issue of cheques.

However small payments like carriage, postage, local conveyance etc., which. by nature, cannot be, paid by cheque should be dealt through another cash book known as “Petty Cash Book”. We will discuss it later in this very chapter.

If the above scheme is adopted, then there is hardly any chance that the employee receiving the cash can misappropriate cash either temporarily or permanently. The only care you should exercise is to see whether the daily total of receipts tallies with the amount deposited in the bank (either on the same day or on the next working day) or not.

This can be verified from the counterfoil of the ‘pay-in- slip’. If you decide to make use of this type of .cash book for your business then it should have only two columns on each side, Bank &Discount. There is no need to have cash column. It may also be called as “Cash book without cash column” or “Bank cash book”.

How to write up? All receipts. whether in cash or by cheque should be entered on the debit side of the book in bank column. All payments to be entered on the credit side of the book in bank column. Treatment of discount allowed and discount received’ is the same as discussed earlier.
Posting is also similar to as described under triple column cash book.