What is a cash book?

By: Rashid Javed | Updated on: October 22nd, 2021

Before talking about the cash book, we would briefly explain what is cash. Cash is a current asset which consists of items used in day to day financial transactions as medium of exchange. In accounting and finance, cash includes, currency notes made of paper, coins, demand deposits, money orders, checks and bank overdrafts etc.

The following items cannot be treated as cash:

  • Dishonored checks
  • Post-dated checks
  • Postage stumps
  • Securities and special investments
  • Trade advances to enployees

The cash balance in a business organization is of significant importance due to the following reasons:

  1. It is readily available to meet current obligations of any business organization.
  2. It is universally accepted as a mode of payment by creditors.
  3. The economic activities of any business involve a regular inflow and outflow of cash and cash equivalents.

Cash book

The cash book is used to record receipts and payments of cash. It works as a book of original entry as well as a ledger account. The entries related to receipt and payment of cash are first recorded in the cash book and then posted to the relevant ledger accounts. Moreover, a cash book is a substitute for cash account in the ledger. A company that properly maintains a cash book does not need to open a cash account in its ledger.

Types of cash book

There are four major types of cash book that companies usually maintain to account for their cash flows. These are given below:

  1. A single column cash book to record only cash transactions.
  2. A double/two column cash book to record cash as well as bank transactions.
  3. A triple/three column cash book to record cash, bank and purchase discount and sales discount.
  4. A petty cash book to record small day to day cash expenditures.
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54 Comments on What is a cash book?
  1. which of the following statement is not true?
    1.cash book is a journal as well as a ledger
    2.cash account shows either credit or debit balance
    3.only cash transactions are recorded in cash book
    4.bank account shows either debit or credit balance
    please tell the aswer for this question

    1. 2 . Is not true.Reason Cash account can only show debit balance or zero balance but not credit balance. It is based on the fact you cannot pay when you have spent all your hard currency.

  2. HI, what about let say for logistic, your are sending the item for delivery at post office so…..Credit cash ( payment ) and Debit delivery ?

  3. I took over from a colleague some weeks ago as Head of finance and recently realized that the
    Cashbook he handed over to me can not be found, what should i do and what are the consequences?

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