Special books and the simple cash book

When a business grows, writing every transaction in one journal becomes slow. So the journal is split into special books (also called day books or subsidiary books), one for each common kind of transaction.

• Cash book: all cash (and bank) receipts and payments.
• Purchases book: goods bought on credit.
• Purchases return book: goods sent back to suppliers.
• Sales book: goods sold on credit.
• Sales return book: goods sent back by customers.
• Journal proper: everything that fits none of the above.

The cash book records money coming in on the left (debit) side and money going out on the right (credit) side, in date order. Its columns are Date, Particulars, V.N. (voucher or bill number), L.F. and Amount. Many firms balance it every day, so they always know how much cash is in hand.

The cash book does two jobs at once: it is the journal for cash transactions and it is also the cash account. So when a cash book is kept, no separate cash account is opened in the ledger.

It is balanced like any account. Roopa Traders started with ₹30,000 cash and received ₹88,200 in all (opening cash included), and paid out ₹64,800. The difference, ₹23,400, is written on the payments side as "By Balance c/d" and brought down as the next period's opening cash.

Posting from the cash book: a name on the debit (receipts) side is credited in its own ledger account ("By Cash"). Cash received from Gurmeet goes on the credit side of Gurmeet's account. A name on the credit (payments) side is debited in its account ("To Cash"). And you can never pay out more cash than you have, so the cash column can never show a credit balance.