As the name says, cash transactions related to cash received or payments made by an organization are only recorded in a Cash Book. This could include money that is received, paid out, and even deposited into or withdrawn from a bank account.
All transactions in a cash book have two sides, debit and credit. All cash receipts are recorded on the left-hand side as a debit, and all cash payments are recorded by date on the right-hand side as a credit.
The following steps are involved in entering transactions in a cash book:
Step 1: Enter the date of the receipt or payment transaction.
Step 2: Write a description of the transaction. (From whom cash received or to cash payment made)
Step 3: Enter the amount of the transaction on the correct side that is receipt on the debit side (left side) and payment on the credit side (right side).
Here are some other things to know about cash books:
The previous day’s cash balance is to be brought forward before taking the cash balance. Add the total on the debit side (receipt side) to the brought forward balance and deduct the credit side (payment side) total.
Illustration:
| Date | Particulars | Debit (Rs) | Credit (Rs) | Debit Balance (Rs) | Credit Balance (Rs) |
| BF | 50000 | NA | |||
| 09.11.2024 | Payment received from XYZ customer | 10000 | 60000 | ||
| 09.11.2024 | Payment received from ABC customer | 15000 | 75000 | ||
| 09.11.2024 | Taxi fare paid | 5200 | 69800 | ||
Remember, your Receipts side (debit side) will always be equal to or higher than the payments side (credit side). As this is a cash book, you cannot make a cash payment more than the cash receipt, so the Credit Balance in the cash book is always blank.
The cash on hand shall be compared with the cash book balance. If the cash on hand and the balance taken are equal, the closing balance shown in the cash book is carried forward to the next day.
Different types of cash books
Some bigger companies use a separate cash receipt book and a cash disbursement book. A three-column cash book can record cash transactions, purchase and sale discounts, and bank account transactions. A petty cash book is used for minor cash spending.
Usually, cash book transactions involve two different accounts. For example, if a company receives a cash payment for sales, entries will be made in the sales ledger and the cash book.
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