need for double column cash book

Mr. A maintains a Simple cash Book for his business. He observes that with the convenience offered by banking transactions, there is an increase in his number of banking transactions. He feels the need for a book in which he can side by side enter his cash as well as banking transactions as both the accounts are very closely related. A book, which like cash book serve the purpose of a Journal as well as a Ledger. A book which could show the balance of both his Cash and Bank accounts.

This requirement is fulfilled by a single book and that is Double Column Cash Book. As is clear from the name itself, Double Column Cash Book has two columns. One is for recording Cash transactions and the other is for recording Banking transactions. On the Left hand side we enter the receipts of cash in cash column and the receipts of cheques and deposits in the bank in the bank column. On the Right hand side we enter the payments of cash in the cash column and the withdrawals from bank and payments by cheques in the bank column.

The Format of Double Column Cash Book is given as under………

DOUBLE COLUMN CASH BOOK

                 Receipts                                                       Payments

Date Particulars L.F Cash Bank Date Particulars L.F. Cash Bank

Total

Total

Lets explain this book with the help of some transactions

Jan 1. Opening balance of cash-$10,000 and Bank-$20,000.

Jan 2. Purchased goods for cash $500.

Jan 5. Purchased furniture, payment made by cheque-$5,000

Jan 8. Paid salaries by cheque-$200.

Jan 11.Deposited cash into bank-$3,000.

Jan 18. Withdrawn $250 from bank for office use.

Jan 27. Sold goods and received cheque $3,000. It was deposited into bank.

Jan 28. Received dividend $450.

Jan 31. Deposited into bank $ 400.

DOUBLE COLUMN CASH BOOK

Receipts                                                                      Payments

Date  Particulars   L.F. Cash Bank Date Particulars L.F. Cash Bank

Jan 1

Jan 11

Jan 18

Jan 27

Jan 28

Jan 31

To Balance b/d*

To Cash A/C

To Bank A/C

To Sales A/C

To Dividend A/C

To Cash A/C

C**

C

C

10,000

250

450

20,000

3,000

3,000

400

Jan 2

Jan 5

Jan 8

Jan 11

Jan 18

Jan 31

Jan 31

By Purchases A/C

By Furniture A/C

By Salaries A/C

By Bank A/C

By Cash A/C

By Bank A/C

By Balance c/d ***

C

C

500

3,000

400

6,100

5,000

200

250

20,550

 Total

10,700

26,400  Total 10,700 26,400

* In the beginning of every month this entry is made to bring forward the opening balance of cash in hand and cash at bank. This balance is the same as shown by your cash book on the last day of the previous month.i.e. the closing balance of the previous month.

** The transactions which involve both cash account and bank account are called contra transactions.  The examples  of contra transactions are……

a) Cash deposited into the bank. 

The Journal entry for this is..

Bank      Dr.

      To Cash A/C

b) Cash withdrawn from the bank for office use.

The Journal entry for this is..

Cash A/C      Dr.

         To Bank A/C

In these two transactions one of the two accounts( Cash account or Bank account) is debited and the other is credited. So an entry is made on both the sides of the Cash Book.  While making a contra entry we write the letter ‘C’ against the entry in the L.F. column. This means that we don’t have to post this entry to any other account in the ledger.

*** At the end of the month (or the period for which you are making the Cash Book) , we total both the sides of the Book and write the difference on the side having a lesser total. This difference shows the cash in hand or at the bank at the end of the month. Cash column always shows an excess of debit over credit but the bank column can have a greater credit total in case of an overdraft.

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