The double column cash book

Most firms keep money both in hand and in a bank current account (which pays no interest). The double column cash book has two amount columns on each side, Cash and Bank, so both are tracked together. Money is put in with a pay-in-slip and paid out by cheque. A cheque can be bearer (anyone holding it can cash it), order (only the named person), or crossed (two lines, often with "& Co." or "A/c payee only", so it can only be paid into a bank account).

Each payment goes in the column it actually uses. Goods bought by cheque: bank column, payments side. Cash sales: cash column, receipts side. A machine bought by cheque goes in as "By Machinery", not Purchases, because Purchases is only for goods.

Some transactions are between cash and bank. Cash deposited in the bank: "To Cash" in the bank column on the receipts side and "By Bank" in the cash column on the payments side. Cash withdrawn for office use: the other way round. Both halves are inside the cash book, so these contra entries are marked C in the L.F. column and are not posted to the ledger.

Cheques need care. A cheque received and deposited the same day goes straight into the bank column. A cheque received but not yet deposited is treated as cash first; when it is deposited later, a contra entry moves it to the bank. If a cheque you deposited is dishonoured (the customer's bank refuses it), enter it on the payments side of the bank column against that customer, because he owes the money again. Bank charges also go on the payments side. Interest or dividends collected by the bank go on the receipts side.

The bank column can end with a credit balance: that means you paid out more than you had, using an overdraft from the bank. In one worked example, cash ends at ₹37,100, but bank payments of ₹32,600 are more than receipts of ₹19,500, so there is an overdraft of ₹13,100, written on the receipts side as the balance c/d. In the book, Tools India ends with cash of ₹10,100 and a bank balance of ₹13,900.