Cashbook

The cashbook is a unique book of account that serves as both a book of original entry (journal) and a ledger account. It is used to record all receipts and payments of money, whether in cash or by cheque.

1. Columnar Cashbooks

Depending on the requirements of a business, cashbooks can be categorized into three main types:

• Single Column Cashbook: Records only cash transactions. It has one amount column on each side (Debit for receipts, Credit for payments).
• Two-Column (Double) Cashbook: Contains two amount columns on each side: one for Cash and one for Bank transactions. This allows the business to track physical cash and bank balances simultaneously.
• Three-Column Cashbook: Contains three amount columns on each side: Cash, Bank, and Discount. The debit side features 'Discount Allowed', while the credit side features 'Discount Received'.

2. Contra Entries

A contra entry occurs when a transaction affects both the cash and bank columns of the same cashbook. These are denoted with the letter 'C' in the folio column. Examples include:

• Depositing cash into the bank (Debit Bank, Credit Cash).
• Withdrawing cash from the bank for office use (Debit Cash, Credit Bank).

3. Discounts

Businesses use discounts to either encourage bulk buying or ensure prompt payment.

Trade Discount

• Given by wholesalers to retailers for bulk purchases.
• It is deducted from the list price on the invoice.
• Note: Trade discounts are NOT recorded in the ledger or the cashbook; only the net amount is recorded.

Cash Discount

• Given to encourage debtors to pay their bills early (prompt payment).
• Discount Allowed: An expense to the business, recorded on the debit side of the 3-column cashbook.
• Discount Received: An income to the business, recorded on the credit side of the 3-column cashbook.

4. Petty Cashbook and the Imprest System

The Petty Cashbook is used to record small (petty) expenses like postage, stationery, and cleaning. It reduces the number of entries in the main cashbook.

The Imprest System

Under this system, the petty cashier is given a fixed amount known as the Float at the start of a period. At the end of the period, the petty cashier is reimbursed the exact amount spent, thereby restoring the balance to the original float.

• Formula: Reimbursement = Total Petty Expenses.
• New Cash in Hand: Float - Expenses.