Cash Book Class 11 Notes Accountancy

This book is used to record all transactions relating to cash receipts and cash payments. Here are the Cash Book Class 11 Notes Accountancy.

Cash book also gives information about the daily receipts, payments, and the closing cash balance at the end of each day. Hence, this is a very popular book and is maintained by all organizations – big or small.

Cash Book – A subsidiary Book and a Principal Book

Cash book achieves a dual purpose:

• It is both a subsidiary book (book of original entry) and a principal book.
• When a cash book is maintained, transactions of cash are not recorded in the journal.
• It is therefore a book of original entry.
• But when a cash book is prepared, a cash account in the ledger is not prepared. In this way, the cash book represents the cash account and hence, becomes the principal book of accounts.

Difference between Cash Account and Cash Book

Cash Book is a Journalized Ledger

1. A cash book is a journal since the transactions are recorded in it for the first time from the source documents.
2. The cash book is also a ledger in the sense that it serves the purpose of a cash account.
3. As such the cash book is a journal as well as a ledger and hence it may be called a ‘Journalised ledger’.

Similarities of Cash Book with Journal

• Just like a journal, transactions in the Cash Book are recorded for the first time from source documents.
• Just like a journal, transactions in the Cash Book are recorded date-wise i.e., in chronological order, as and when they take place.
• Just like a journal, transactions from Cash Book are also posted to the relevant accounts (except Cash Account) in the ledger.
• Just like a journal, a Cash Book also contains a ledger folio column.

Similarities of Cash Book with Ledger

• The form of a Cash Book closely resembles a ledger account.
• It has two equally divided sides having identical columns. The left side (receipt side) is the debit side and the right side (payment side) is the credit side.
• Cash Book itself serves as a Cash Account also and as such when a Cash Book is maintained, a Cash account is not opened in the ledger.
• Just like a ledger account, the words ‘To’ and ‘By’ are used in a Cash Book also.
• It is balanced just like a ledger account.

Advantages of Maintaining a Cash Book

1. Cash Book is a journal as well as a ledger.
2. Both Cash and Bank transactions can be entered into the Cash Book.
3. It enables a businessman to know the balance of cash in hand and at the bank at any point in time without waiting for a posting from the journal.
4. It gives information about daily receipts, payments, and the closing cash and bank balance at the end of each day.

Types of Cash Book

Following are the types of Cash Book:

• Single Column/One Column Cash Book
• Double Column Cash Book
• Triple Column Cash Book
• Petty Cash Book

Single Column Cash Book

Its format is similar to an account, with one account column on each side. The left-hand side known as ‘Debit’ records receipts of cash and the right-hand side known as ‘Credit’ records payments. Its format is shown below:

1. Date: The day, month, and year of the transaction are recorded in this column.
2. Particulars: The name of the account in respect of which cash has been received or payment has been made is recorded in this column.
3. Voucher Number: The document supporting a transaction is called a Voucher. The special number of the voucher certifying the receipt or payment is written in this column.
4. Ledger Folio or L.F.: This column records the page number of the ledger where the posting of these amounts has been made.
5. Amount: The amounts received are recorded on the debit side and the amounts paid are recorded on the credit side.

Balancing of Cash Book and Carry Forward

The following points should be taken into consideration while balancing the cash book:

• The receipts (Debit) column will always be bigger than the payments (Credit) column.
• The difference will be written on the credit side as ‘By Balance c/d’. This will make the total of the two sides equal and the total will be written in the two columns opposite one another.
• The closing balance becomes the opening balance of cash in hand at the beginning of the next period and is written on the debit side as ‘To Balance b/d’.

Cash Book always shows a debit balance:

It should be noted that the total of the debit side of the cash book always exceeds the credit side. It is because a businessman cannot pay more cash than what he has got.

Double Column Cash Book

It is a cash book with two column on each side; one column for recording cash transactions and the other column for recording bank transactions.

Bank Account

A bank account is a personal account and as such the rule applicable to a personal account i.e., ‘Debit the receiver and credit the giver’ should be followed while recording transactions in the bank column of the Cash Book.

Opening Balance

As the cash column would always show a debit balance, it will be written as ‘To Balance b/d’ on the debit side. And on the contrary, if the credit balance of bank is given, it will be written as ‘By Balance b/d’ on the credit side.

Contra Entries

When cash is deposited into the bank or when cash is withdrawn from the bank for use in the office, each such transaction affects both ‘Cash Column’ as well as ‘Bank Column’ and the transaction is therefore, recorded on both sides of the cash Book.

Such entries, the double entry of which is complete in the Cash Book itself, are called ‘Contra Entries’.

Receipt of Cheque and Bank Draft

a) Cheques received from customers and deposited into bank the same day: These are entered in Bank Column on the debit side.

b) Cheques received from customers but not deposited into the bank the same day:
Cheques in Hand A/c Dr.
To Banerjee
(Cheque received from Banerjee not yet deposited into the bank)

Special Purpose Subsidiary Book Class 11 Notes

Payment by Cheque

As soon as we issue a cheque to someone, it will be immediately recorded on the credit side in the Bank column so that we may be acquainted with the true balance at the bank.

Dishonor of a Cheque

If a cheque, received from a customer and deposited into the bank for collection is dishonored, an entry will be made on the credit side of the cash book by entering the amount of the dishonored cheque in the bank column.

Cash Discount

In a cash book having Cash and Bank columns, the amount of discount is recorded in the journal proper.

Petty Cash Book

It is prepared to make a record of petty expenses.

Imprest System of Petty Cash Book

Under this system, the petty cashier is given a definite sum, say 2,500, at the beginning of a certain period. This amount is called the ‘imprest amount’.

The petty cashier goes on paying all petty expenses out of this imprest amount and records them in the petty cash book maintained by him.

At the end of the given period, say after a month, the chief cashier reimburses the amount spent by the petty cashier.

Advantages of Imprest System

• Control Over Misappropriation: Since the impressed sum is small, it does not provide a temptation either to the petty cashier or to other staff to misappropriate it.
• Control Over Petty Expenses: Petty expenses are kept within the limit of imprest since the petty cashier can never spend more than the available petty cash with him.
• Control Exercised by Cashier: The main cashier keeps a close watch on the amount refunded to the petty cashier from time to time.
• Lesser Chances of Misue of Cash by Petty Cashier: At any time, the amount of cash in hand plus the total value of vouchers that have not been reimbursed must equal the imprest amount.

Advantages of Petty Cash

• Easiness in Posting: Only the total of each head of expense is posted into the ledger.
• Control of Petty Expenses: The main cashier keeps checking the petty cash book from time to time and a proper check is put on any unnecessary expenditure.
• Lesser Chances of Fraud: Petty Cashier obtains a receipt of every payment made by him and keeps a proper record of them.
• Simple Method: The maintenance of the petty cash book does not require any specialized accounting knowledge.

These are the Cash Book Class 11 Notes Accountancy. If you have any doubts in these notes, you can ask in the comments section.