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Cash Book

Updated on :  

08 min read.

Businesses benefit extensively from the maintenance of cash books since they help in managing finances efficiently, tracking finances regularly, thus allowing in planning and budgeting.

Meaning of cash book for businesses

Cash books contain the records of all transactions involving cash in a detailed manner. They have all the transactions, including cash receipts, cash withdrawals, and bank deposits and withdrawals. A cash book will always contain more information than a normal cash account.

The cash book may also operate as a subsidiary ledger since it records all the debit and credit transactions involving cash in chronological order.

According to the definition of books of accounts given under the Income Tax Act, 1961, cash books form part of the books of accounts. 

As per Section 44AA, If the gross receipts exceed the specified limit as per the Income Tax Act, 1961, it is mandatory for businesses to maintain their books of accounts:


Particulars

Limit

Business/Profession

Sale/turnover/gross receipts is more than Rs.25 lakh
                          OR
Income is more than Rs.2.5 lakh in any of the three preceding years

Format of a cash book


Date

Particulars

Ledger Folio (LF)





Discount Allowed




Cash

Bank

Types of cash book in accounting

  • Petty cash book

Petty means small. Therefore, this cash book is used specifically for small value transactions daily. The nature of these expenses accounted for are repetitive. Expenses such as printing, stationery, postage, telegrams, etc., are accounted for in the petty cash book.
This is done to ensure no heavy load is placed on the regular cash book since these expenses are repetitive.

  • Single column cash book

Also known as a simple cash book, the single column cash book records cash payments on the debit side (left side) and cash receipts on the credit side (right side). The entries about bank transactions and discounts will be recorded in separate ledgers. The standout feature of the cash book is that it will always depict a debit balance.

  • Two column cash book

In this case, the cash book consists of two columns, each on the debit and credit sides, respectively. While one column records the cash transactions, the additional column records transactions concerning discounts allowed or discounts received, as the case may be. Discount allowed, being an expense, will be recorded on the debit side, whereas discount received, being an income, will be recorded on the credit side.

  • Three column cash book

This is the most comprehensive and detailed cash book. The three column cash book, as the name suggests, comprises three columns each on the debit and credit sides, respectively. One column records cash transactions, the second column records bank transactions and the third, transactions relating to discounts allowed and received, as the case may be.