After going through this lesson you will be able to understand the meaning of the cash book.
Meaning of Cash Book
Every transaction is first recorded in Journal. But as the business grows, the volume of transactions also increases and it becomes practically very difficult to record all the transactions in Journal. So, for all the transactions related to Cash whether it is receipt or payment a separate book is maintained, which is called CashBook.
In Cash Book, all the transactions related to receipts of cash are recorded on the left side of the book as Cash Receipts and all the transactions related to cash payments are recorded on the Right Side of the Book as Cash Payments. Balance of Cash or Bank on any day can be calculated by deducting the total of the Right side (or Payment side) of the book from a total of the Left Side (or Receipt side) of the book.
CashBook- A Subsidiary and a Principal Book
Cash Book serves dual purpose i.e. Subsidiary Book as well as Principal Book. If Cashbook is prepared then all the cash transactions are directly recorded in the CashBook and there is no need to record these transactions in Journal. On the basis of Cash Book, Ledger Accounts are prepared and therefore, it is called a Subsidiary Book.
Once, the cash transactions are recorded in the CashBook there is no need to post them again in the Cash Account. Cash Book in itself represents the Cash and Bank Account, that’s why it is called the Principal Book. From this, it can be concluded that Cash Book serves the purpose of both Principal as well as Subsidiary Book.
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Ledger in Accounting?
Ledger is the next stage after Journal. After recording all the entries in the Journal, the next step is the posting of the transaction in the respective accounts. These accounts are collectively known as Ledgers.