Definition and Explanation of Cash
book a journal or ledger?
Columns of the cash book
Difference between cash account and cash book.
The book in which
all cash transactions (either cash is received or
paid) are primarily recorded according to dates, is
called 'Cash Book'.
A Cash Book has the
- It plays a
dual role. It is both a book of original
entry as well as a book of final entry.
All cash transactions are primarily recorded in
it as soon as they take place; so it is a
journal (a book of original entry). On the other
hand, the cash aspect of all cash transactions
is finally recorded in the Cash Book (no posting
in Ledger); so a Cash Book is also a Ledger (a
book of final entry).
- Only one
aspect of cash transaction is posted to the
ledger account. The other aspect ( i.e. cash
aspect) needs no posting in Cash A/c. Since the
Cash Book is the substitute for Cash A/c, no
Cash A/c is opened in the ledger.
- It has two
identical sides-left hand side, the debit side
and right hand side, the credit side.
- All the items
of cash receipts are recorded on the left hand
side and all items of cash payments on the right
hand side in order of date.
- The difference
between the total of two sides shows cash in
- Its balance is
verified by counting actual cash in the cash
- It always
shows debit balance. It can never show credit
transactions are numerous. What is credit
transaction today, will be cash transactions
tomorrow. In other words, all credit transactions
are finally settled by cash. If like all other
transactions cash transactions are also recorded
primarily in Journal, the cash aspect of the
transactions will be required to be posted to Cash
A/C, in the Ledger separately. This involves much
time and labour. This is why, cash transactions are
recorded in a separate book named Cash Book. It
saves much time and labour. Besides this the Cash
Book renders the following benefits:
- Daily cash
receipts and cash payments are easily
- Cash in hand
at any time can easily be ascertained through
Cash Book balance.
- Any mistake in
the book can be easily detected at the time of
verification of cash.
defalcation of money can be detected while
- Since cash is
verified daily, Cash Book is always kept
From the above
discussion it appears that the Cash Book is the
substitute for the Cash Account. In fact, no
separate Cash Account is opened in the Ledger, Cash
Book serves the purpose of the Cash Account. The
entries in Cash Book are regarded as one aspect of
the Double Entry System - the other aspect is posted
to the Ledger in the concerned account. L.C. Cropper
remarked "Every entry in the Cash Book makes one
half of a double entry; the other half of the double
entry appears on the opposite side of some account
in the Ledger."From this angle, 'Cash Book is a
On the other hand,
all cash transactions are primarily recorded in the
Cash Book in order of date and thereafter posted to
the concerned ledger accounts. Judging from this
angle, 'Cash Book is a Journal'. Thus we see that a
Cash Book is the 'mixture of Journal and Ledger'.
According to Spicer & Pegler, "the Cash Book is
actually a ledger account, but owing to the large
number of entries made therein, it is kept in a
separate book, called a Cash Book, which is used
also as a book of prime entry."
The date of
transaction is written in this column in two
lines—in the first line, the year and in the second
line, the name of the month followed by the actual
In this column the
name of the opposite account is written (the second
aspect of cash transaction). Below this is written
the narration of the transaction.
3. L.F. (Ledger Folio):
The page number of
the Ledger where the concerned (opposite ) account
has been opened, is written in this column. This
will help to locate the account from the Ledger. It
may be noted that in a Ledger account J.F. is
written as reference, while in a Cash Book L.F. is
written. It is so, because cash transactions are not
recorded in any Journal.
The amount of the
transaction is recorded in this column. The amount
of cash received is recorded on the debit side in
amount column and the amount of cash paid is
recorded on the credit side in amount column.
5. V. NO. (Voucher Number):
The voucher number
of each item of receipt and payment is also written.
A voucher is necessary for each item of receipt and
payment. Generally, a voucher has a serial number
and this number-is written in this column (V. No).
When cash is
received from a debtor or customer, generally a
receipt or 'cash memo' is issued to the debtor which
is called Receipt Voucher. Again, when money is paid
to a creditor or supplier a receipt is obtained from
him which is called 'Payment Voucher, Cash
transactions are recorded in the Cash Book on the
basis of Receipt Voucher and Payment Voucher.
Thus, a document
evidencing cash receipts and payments and forming
the basis for making entries in the Cash Book is
called Cash Voucher.
In fact, Cash Book
is a substitute for a Cash Account. Yet there are
some differences between the two, which are given
It is a
separate book in which cash transactions
are directly recorded.
It is an
account in a Ledger in which posting is
made from journal.
the purpose of both journal and ledger
and hence cash transactions need not be
primarily recorded in Journal.
the purpose of a Ledger only. If Cash
A/C is opened in the Ledger, all cash
transactions are first recorded in
is not required.
for Ledger Folio is provided.
for Journal Folio is provided.