The cash book and the three-column cash book
Financial Accounting · Unit II · Topic 7 of 14 · 5 min read
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1. Meaning and features
The cash book records all receipts and payments of cash and, in its usual form, of bank. It is both a book of original entry (transactions are entered in it directly, not first journalised) and a ledger account (it takes the place of Cash A/c and Bank A/c, so there is no separate cash account in the ledger).
Features: receipts on the left (debit) side and payments on the right (credit) side; entries in date order; the cash balance can never be credit, because one cannot pay out more cash than one has; the bank balance may be credit, which is an overdraft; it is balanced periodically and the balance tallies with cash in hand; it is both a subsidiary book and a principal book.
2. Kinds of cash book
- Single column — cash column only.
- Double column — cash and discount, or cash and bank.
- Three column — discount, cash and bank on each side. The syllabus limits problems to this one.
- Petty cash book — small payments by a petty cashier, usually on the imprest system.
3. Rules for the three-column cash book
- Contra entries. A transaction between cash and bank appears on both sides. Cash deposited into bank: debit side bank column “To Cash (C)”, credit side cash column “By Bank (C)”. Cash withdrawn from bank for office: the reverse. The (C) tells the ledger clerk not to post it, since both sides are already in the cash book.
- Cheques received. If deposited the same day, enter in the bank column. If deposited later, enter in the cash column on receipt, and pass a contra entry on the day of deposit.
- Discount allowed to a customer goes in the debit-side discount column, next to the cash received from him; discount received from a supplier goes in the credit-side discount column, next to the payment.
- Discount columns are not balanced. They are only totalled. The debit total is posted to the debit of Discount Allowed A/c; the credit total to the credit of Discount Received A/c.
- Bank charges, interest and dividends collected by the bank are entered in the bank column only.
- Drawings by cheque come out of the bank column; in cash, out of the cash column. “Drew for office use” is a contra entry; “drew for personal use” is drawings.
4. Worked problem: March 2025 (January 2026, 80-mark paper)
Debit side (receipts)
| Date | Particulars | Disc. | Cash | Bank |
|---|---|---|---|---|
| Mar 1 | To Balance b/d | 15,000 | 10,000 | |
| Mar 3 | To Cash (C) | 9,000 | ||
| Mar 8 | To Sales | 6,000 | ||
| Mar 15 | To Kumar | 300 | 12,000 | |
| Mar 20 | To Bank (C) | 7,500 | ||
| Mar 24 | To Interest | 1,000 | ||
| Total | 300 | 35,500 | 25,000 | |
| Apr 1 | To Balance b/d | 3,900 | 16,000 |
Credit side (payments)
| Date | Particulars | Disc. | Cash | Bank |
|---|---|---|---|---|
| Mar 3 | By Bank (C) | 9,000 | ||
| Mar 4 | By Purchases | 12,000 | ||
| Mar 10 | By Rakesh | 400 | 7,600 | |
| Mar 20 | By Cash (C) | 7,500 | ||
| Mar 26 | By Advertisement | 1,500 | ||
| Mar 31 | By Drawings | 3,000 | ||
| Mar 31 | By Balance c/d | 3,900 | 16,000 | |
| Total | 400 | 35,500 | 25,000 |
Working. Cash: receipts 15,000 + 12,000 + 7,500 + 1,000 = 35,500; payments 9,000 + 12,000 + 7,600 + 3,000 = 31,600; balance 3,900. Bank: 10,000 + 9,000 + 6,000 = 25,000 less 7,500 + 1,500 = 9,000; balance 16,000. Discount allowed Rs. 300 (Kumar); discount received Rs. 400 (Rakesh: 8,000 − 7,600). On 8 March, goods sold for cash and banked the same day may be put straight into the bank column (as here), or entered in cash and then deposited by a contra entry; the bank balance is the same either way.
5. Practice: June 2012 (January 2026, 100-mark paper)
Opening cash Rs. 3,065, bank Rs. 6,780. Priya’s cheque (3 June) goes into the cash column on receipt and is moved to bank by a contra entry on 6 June. Petty cashier (Rs. 1,000) and cash purchases (Rs. 2,000) come out of cash. Bank charges (300), furniture by cheque (14,050) and drawings from bank (2,000) come out of bank; dividend collected (1,200), the cheque for goods banked the same day (6,000) and the commission cheque (2,500) go into bank. Answer: cash side total Rs. 24,265, closing cash Rs. 17,065; bank side total Rs. 20,680, closing bank Rs. 4,330. There are no discounts in this problem.
How this is examined
A 10-mark problem in the 80-mark paper (alternative to the journal) and a 16-mark problem in the 100-mark paper. The 6-mark theory alternative is “What is cash book and state features of cash book” (January 2026); section 1 is the answer, with the list of kinds from section 2. A ruled single table with both sides side by side is the form used in the examination hall; on a phone the two sides are shown separately above, but copy them side by side.
Now try the real questions: Financial Accounting past question papers.