It is desirable that the cash transactions must be recorded immediately as far as possible so as to avoid errors, omission or frauds. This would also facilitate the trader to know at once the position of cash in time. Accordingly it is convenient to record the cash transactions in a separate book called the Cash Book with first passing the entries through the general entry. Thus the cash book is a book of original entry as well as a ledger account in which all cash transactions are entered as they occur. A cash book may therefore be defined as the book in which the trader records detailed particulars of all receipts and payments of money.

Debits and Credits:

The cash book (or cash account) has two sides: DEBIT (left hand) side for recording receipts of money; CREDIT (right hand) side for recording payments of money.

The Receipts of cash in cash book are noted from the cash memos or ‘cash receipts forms’ kept in the form of a book. Some of the important points while recording the details of the receipts may be noted as under:

(i)    The introduction of capital or/and additional capital must be entered as such i.e., A’s Capital Account or Rock’s Capital Account.

(ii)    Customers or other debtors who pay money in settlement of their debts must be named.

(iii)    When the cash is received on account of goods (or stock) sold, only the term ‘Sales’ or ‘Cash Sales’ is used; the name of the customer is not required.

(iv)    Revenues are recorded on the basis of their nature.

(v)    Enter the transactions in the date order on the next available line with no blank spaces between.

(vi)    The Serial number of receipts may be entered in the column provided for the purpose.

The payments in cash are recorded on the basis of vouchers obtained from the parties whom the payment is made. These vouchers are kept in serial order and may be quoted in the column provided for the purpose. The following hints may prove useful:

(i)    Goods bought for cash are recorded simply as ‘purchase.’

(ii)    The purchases of property or articles not meant for resale must be given correct account titles.

(iii)    The name of the suppliers must be given so that the payment is correctly posted in their personal accounts.

(iv)    Expenses are recorded on the basis of their nature.

The following is the standard form of single or single column cash book:

        Dr.____________________________Cash Book_______________________________Cr.

                               Receipt                                                                                  Payments

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