Classification Of Cash Book

            Classification Of Cash Book

Cash Book may be of following three types:

1.Simple Or Single Cash Book.

2.Double Columns Cash Book.

3.Three or Treble Column Cash Book.

Simple Or Single Column Cash Book

It is a cash book in which only one and only cash transaction are recorded. By single column we mean "one amount column" on each side of the Cash Book.One amount column on the debit side in which inflow of cash (cash recieved) is recorded and one amount column on the credit side in which outflow of cash (cash paid) is recorded. It is generally maintained by such business concerns which do not have bank accounts.(small business concerns). 

Balancing The Cash Book

The Cash Book is balanced in the same way as a ledger account. A single Column Cash Book always shows debit balance (Debit side exceeding credit side) because more cash cannot be paid than what we have. To verify the accuracy of the Cash Book, it should be balanced daily (which may be shown in the Cash Book with the red pencil). The balance as per Cash Book must be tally with the actual cash in the cash box. At the end of the period the Cash Book is finally balanced (showing debit balance) and the balance is put on the credit side for the purpose of closing the cash book. This balance will be transferred on the debit side of the cash book as opening balance of the next period.

Double Column Cash Book

Cash A/c and Bank A/c are two busiest accounts in the ledger and they should be removed from the ledger to reduce the volume and size. We have also discussed how Cash A/cis removed from the ledger and instead of it the cash book is kept to record cash transactions.

In the same way no Bank A/c is opened in ledger for recording bank transactions, rather an additional amount column is provided on each side of '' Single Column Cash Book" for recording the bank transactions. One more column for amount is provided on the debit side and one on the credit side of the single Column Cash Book.These two amount column on the debit side and credit side will serve as Bank A/c and so it will not be necessary to open the Bank A/c in the ledger. The Cash Book having two Amount Columns on the both sides is called "Double Column Cash Book".

                       Advantages

The following advantages are derived from Double Column Cash Book.

1.All entries made in "Bank" Double Column Cash Book from a part of double entry system and hence a separate Bank A/c need not be opened in the ledger. It saves time, labour and cost.

2.Both cash transaction and credit transactions are recorded in the same book. So both cash balance and credit balance are easily available from the same book.

Thus it is said that the Double Column Cash Book has two accounts in it, the Cash A/c and the Bank A/c.

Contra Entry

In any account we can only have one half of double entry. An account cannot be debited and credited at the same time. For example , when sell goods for cash , cash received will be recorded on the debit side of the cash Book and goods will posted on the credit side of the Sales A/c. But in Double Column Cash Book and the, we have two accounts Cash A/c and the Bank A/c, so it is possible to have a debit entry and a credit entry at the same time. For example, cash of Rs. 5,000 is deposited into the bank. In this transaction both Bank A/c and Cash A/c are involved and they  will be recorded on the both sides of Double Column Cash Book i.e. on the debit side in the bank column and on the credit side in the cash column.

Thus a transaction in which Cash A/c and Bank  A/c are involved, is recorded on the both sides of Double Column Cash Book, it is called "Contra Entry".

In recording such transactions letter "C" is written in "L.F." column because both aspects of the transaction are recorded and  there is no need to post them into the ledger.

Treble Column Or Three Column Cash Book:

We know, when cash is received from the debtors, discount may be allowed to them. And when cash is paid to creditors, discount may be received from them. It means the cash and the discount are very much related to each other. Another interesting thing is that when the cash is received, the discount is allowed and both cash account and discount account are debited. On the other hand, when the cash is paid, the discount is received and both the cash account and discount accounts are credited in the books of account. Thus in "Double Column Cash  Book another 'amount' column is provided on each side to record discount allowed and discount received". It means the Cash Book now will have three "amount column in each side, i.e. Cash Column, Bank Column and Discount Allowed Column on the debit side and Cash Column, Bank Column and Discount Received Column on the credit side.

It may also be noted that when 'Discount' column is added with both sides of Double Column Cash Book is becomes a "Treble or Three Column Cash Book."

It must be remembered that the Discount Column in Treble Column  Cash Both is not an account. Both the Discount Allowed and Discount Received Account are opened in the ordinary ledger.These three columns are memorandum columns only; they help us remember how much discount has been allowed and received. The totals of discount allowed and discount received columns from two sides of Cash Book are posted in Discount Allowed A/c and Discount Received A/c respectively in the Ledger.