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CHAPTER Special Purpose Books I
CHAPTER

10 —Cash Book

MEANING OF KEY TERMS USED IN THE CHAPTER

1. Special Purpose Sub-division of the Journal into various books recording transactions
Books or of similar nature are called Subsidiary Books.
Subsidiary Books
2. Cash Book Cash Book is a Special Purpose Subsidiary Book or Journal in which cash
receipts and cash payments are recorded.
Kinds of Cash Book
(i) Simple Cash It is a cash book in which only cash transactions are recorded. It has
Book only one column on each side of the cash book.
(ii) Double Column or It is a cash book which has two columns on each side to record cash
Two-column Cash receipts and payments and Bank transactions. It has two columns, i.e.,
Book: Cash Book Cash and Bank on each side.
with Bank Column
(iii) Petty Cash Book It is a cash book in which payments of small amounts are recorded.
3. Imprest System of It is a system whereby an estimate of expenditure is made and the
Petty Cash estimated amount is given to the Petty Cashier. Thereafter, he submits the
statement of expenses at the end of the period decided (a week, Fortnight
or Month), which is reimbursed to him to make the petty cash equal to the
original petty cash amount.
4. Cash Discount Cash discount is the amount of discount received or allowed on cash
payments and cash receipts respectively. Discount received is an income
for the business while discount allowed is an expense.
Note: Discount Received, Discount Allowed and Cancellation of Discount
Received or Discount Allowed (in case of dishonour of cheque) is
recorded through Journal Proper.
5. Cheques in Hand It means cheques which have been received but not deposited in bank.
6. Contra Entry It means a transaction involving both cash and bank. Such transactions
though recorded in the cash book are not posted in the ledger. In the folio
for ledger letter ‘C’ is written to indicate that it is a contra entry.

CHAPTER SUMMARY

• Cash Book: Cash Book records cash transactions. Even banking transactions can be recorded
in the Cash Book. When a Cash Book is maintained, a separate Cash Account is not opened
in the Ledger as the purpose of opening a Cash Account is served by maintenance of a Cash
Book. Thus, the Cash Book plays a dual role as a Journal as well as a Ledger.
• Contra Entries: Contra entries mean entries that are made on both sides of the Cash Book.