The Cash Book is both a book of original entry and a ledger account. It records all cash and bank transactions.
Types of Cash Book: 1. Single Column Cash Book — Records only cash transactions. Has debit (receipts) and credit (payments) sides. 2. Double Column Cash Book (Cash + Bank) — Records both cash and bank transactions. The Bank column records cheques received and issued. 3. Triple Column Cash Book (Cash + Bank + Discount) — Adds a discount column on each side. Discount allowed (debit side) and discount received (credit side). 4. Petty Cash Book — Records small day-to-day expenses. Maintained on the Imprest System — a fixed amount is given to the petty cashier, who gets reimbursement when the fund is exhausted.
Contra Entries occur when both cash and bank are affected — e.g., cash deposited into bank or cash withdrawn from bank. These are recorded on both sides of the Cash Book and marked with 'C' in the L.F. column. They do not need ledger posting.
Imprest System: The petty cashier starts each period with a fixed amount (imprest amount). At the end of the period, the amount spent is reimbursed so the petty cashier again has the original imprest amount.
Exam tip: ICAI loves testing the Triple Column Cash Book. Practice balancing it carefully — the Cash column can never show a credit balance (you cannot pay out more cash than you have), but the Bank column can show a credit balance (bank overdraft).