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What is CashBook & its format – Three column Cashbook

Cashbook
Cash book

What is Cashbook:

A book in which receipts and payments of money are record,using debit and credit rules.

CashBook:

           In small business where only one person is employed for receipt and payments of cash, only one book is used for recording of cash received and paid this book is called as cash book .Every page of the cash book Is divided into two parts the right hand side is used for payments and left hand side for receipt of cash.

Three format of cashbook are being used these are:

1. Simple cash book

2. Two column cash book

3. Three column cash book

Any of the above cash book can be used by the firm according to its needs the form and method of recording in all the above three kinds of cash book is discussed and illustrated below:

  1. Simple cash book:

                 This type of cash book is used by such firms where receipts and payments are usually made in cash and cheques are not frequently used similarly in such business the discount is not allowed received as custom of trade. Therefore only one amount column is pervaded o receipt and payment side. This is also called as single column cash book the standard form of single column cash book is given as under:

 

                                                            CashBook

    Receipts                                                                       Payments

DateVr NoDescriptionRefAmountDateVr.noDescriptionRefAmount
          
          

 

1.     Two column cash book:

                         In some business the receipt and payments of discount at the time of payment and receipt of a cash is very usual. In order to avoid the separate record of discount allowed and received a column is provide along with the amount column on either side of cash book this type if cash book is called as two column cash book.

            The discount is allowed is record on debit receipt side and discount received on credit payment side. The totals of discount column of both the sides are posted to ledger in their repetitive accounts separately.

 Receipts                                                                                      Payment

DateVr NoDescriptionRefDiscountAmountDateVr.noDescriptionRefDiscountAmount
            
            

 

3. Three column cashbook:

                   All the enterprise makes of the payments and receipt through bank it is useful to provide a bank column o the receipt as well as payment side of the cash book this helps the cashier to record cash and bank transaction in one book this type of cash book is called as three column cash book.

Receipt                                                                                                           Payment

DateVr NoDescriptionRefDiscountCashBankDateVr.noDescriptionRefDiscountCashBank
              
              

                    While making entries in three column cash book, the following points should be noted,If the previous balance of bank is favorable it is recorded on the debit side and if it is overdrawn, it is recorded on the credit side of the cash book in bank column,

  1. When cash is pain into the bank it is written in cash column on the credit side and is bank column on debit side. When cash is drawn from the bank it is entered on the debit side under cash and credit side under bank.
  2. Whenever, any transaction effect both cash and bank, it is recorded on both sides of three column cash book as in 2 above. This type of entry is called contra entry. This is so indicated by putting “C” in reference column. This entry is not posted into the ledger.
  3. When any cheque is received from customer and paid into bank on the same day it is entered on the debit side in the bank column.
  4. When any cheque is received from the customer but not paid into the bank on the same day, it is entered on the debit side of the cash column on any later date, when this cheque is paid into the bank the bank is debited and cash is credited(Contra entry).
  5. When any payment is made by cheque it is entered on the credit side in the bank column.
  6. When any paid cheque is dishonored, it is credited to the bank account and recorded on the credit side.
  7. when bank allows any interest it is recorded on the debit side in the bank column.
  8. Bank charges for collection are entered on the credit side in bank.
  9. Bank charges for collection are entered on the credit side in bank.

 

You may also read the cash journal.

How to pass entries in three column cash book.

Recommended post: Bank Reconciliation statement

About the author

Salman Qureshi

Salman Qureshi is an Accountant by profession & he loves to write on Commerce & Management Sciences Subject to assist Students. Hope you guys will like his effort.

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