The cash book records all receipts and payments of cash and through the bank. It is both a book of prime entry and the ledger account for cash and bank, with debit entries for money received and credit entries for money paid. It may have separate columns for cash, bank, and discounts.
Cash Book (two-column):
Debit (receipts): Cash | Bank
Credit (payments): Cash | Bank
Real-world exampleEvery cheque paid and received is entered in the cash book, which doubles as the bank ledger account.
Common follow-ups: Is the cash book part of double entry? | What goes on the debit side?
Books of Prime EntryBank ReconciliationCash Book & Petty Cash
What is the difference between a single, two, and three-column cash book?
Beginner
A single-column cash book has one money column (cash or bank). A two-column cash book has separate cash and bank columns, handling both together. A three-column cash book adds discount columns (discounts allowed on the debit side, discounts received on the credit side) as memorandum totals posted to the discount accounts.
Three-column: Discount | Cash | Bank on each side.
Discount columns are memoranda, posted in total to the ledger.
Real-world exampleA business handling both cash and cheques and offering settlement discounts uses a three-column cash book.
Common follow-ups: What do the discount columns record? | Are discount columns part of double entry?
Books of Prime EntrySales & Purchase LedgersCash Book & Petty Cash
What is petty cash and the petty cash book?
Beginner
Petty cash is a small amount of cash kept on hand to pay minor expenses (postage, refreshments, small stationery). The petty cash book records these small payments, usually with analysis columns by expense type, and receipts of cash to top up the float. It's a book of prime entry (and often a ledger account for petty cash).
Real-world exampleSmall office expenses like stamps and taxi fares are paid from petty cash and recorded in the petty cash book.
Common follow-ups: What expenses use petty cash? | Why analyze petty cash by column?
Books of Prime EntryControl AccountsCash Book & Petty Cash
What is the imprest system for petty cash?
Intermediate
Under the imprest system, petty cash starts with a fixed float (the imprest amount). Payments reduce the cash; periodically the float is restored (reimbursed) by exactly the amount spent, bringing it back to the imprest. At any time, cash on hand plus vouchers should equal the imprest, providing a built-in control.
Imprest 200. Spent (vouchers) 150. Cash left 50.
50 + 150 = 200 (checks).
Reimburse 150 -> float back to 200.
Real-world exampleThe cashier reimburses exactly what was spent so the petty cash float always returns to its 200 imprest level.
Common follow-ups: How does the imprest system act as a control? | What should cash + vouchers equal?
Correcting ErrorsControl AccountsCash Book & Petty Cash
How is the petty cash book reimbursed and posted?
Intermediate
At the end of the period, total the analysis columns. The total spent is reimbursed from the main cash book (Dr petty cash, Cr bank). Each analysis-column total is posted to the debit of the relevant expense account in the nominal ledger, and any VAT column to the VAT account.
Reimbursement: Dr Petty Cash / Cr Bank (amount spent)
Analysis totals: Dr Postage, Dr Stationery, Dr VAT (from columns)
Real-world exampleMonthly, the postage and stationery column totals are posted to their expense accounts and the float topped up from the bank.
Common follow-ups: Which account is credited on reimbursement? | Where do analysis totals go?
Books of Prime EntryControl AccountsCash Book & Petty Cash
What is a petty cash voucher?
Beginner
A petty cash voucher is a source document authorizing and evidencing a small cash payment. It records the date, amount, purpose, any VAT, and signatures of the person claiming and the authorizer, and receipts are attached. Vouchers support entries in the petty cash book and reconcile the float.
Real-world exampleAn employee submits a signed voucher with the taxi receipt to claim reimbursement from petty cash.
Common follow-ups: Why must vouchers be authorized? | How do vouchers reconcile the float?
Books of Prime EntryCorrecting ErrorsCash Book & Petty Cash
What is the difference between cash and bank columns in the cash book?
Beginner
The cash column records physical cash (notes and coins) receipts and payments; the bank column records money moving through the bank account (cheques, transfers, card payments). Keeping them separate lets the business track till cash distinctly from the bank balance and reconcile each.
Real-world exampleA cash sale increases the cash column, while a customer's bank transfer increases the bank column.
Common follow-ups: Which column records a cheque received? | Why separate cash from bank?
Bank ReconciliationBooks of Prime EntryCash Book & Petty Cash
What is a contra entry in the cash book?
Intermediate
A contra entry records a transaction affecting both the cash and bank columns of the same cash book—typically paying cash into the bank or drawing cash from the bank. Both sides of the entry appear in the cash book (one column debited, the other credited), marked with a 'C' to show no other ledger posting is needed.
Pay 300 cash into bank:
Cr Cash column 300 (money out of till)
Dr Bank column 300 (money into bank) -- marked C
Real-world exampleBanking the day's takings is a contra entry moving money from the cash column to the bank column.
Common follow-ups: Why is a contra marked 'C'? | Does a contra need a nominal ledger posting?
Bank ReconciliationBooks of Prime EntryCash Book & Petty Cash
How do discounts allowed and received appear in the three-column cash book?
Intermediate
Discounts allowed (to customers for prompt payment) are recorded in the discount column on the debit (receipts) side; discounts received (from suppliers) in the discount column on the credit (payments) side. These columns are memoranda: their totals are posted to the debit of Discounts Allowed and credit of Discounts Received respectively.
Receipt side discount total -> Dr Discounts Allowed
Payment side discount total -> Cr Discounts Received
Real-world exampleWhen a customer pays early and takes a discount, the amount goes in the receipts-side discount column.
Common follow-ups: Which side records discount received? | How are the discount totals posted?
Books of Prime EntrySales & Purchase LedgersCash Book & Petty Cash
How do you balance the cash book?
Beginner
Total both sides of each money column. The difference (balance carried down, c/d) makes the two sides equal and is brought down (b/d) as the opening balance for the next period. A debit balance b/d means cash/bank in hand; a credit balance b/d on the bank column means an overdraft.
Bank column: receipts 5,000, payments 4,200
Balance c/d 800 (credit side to balance)
Balance b/d 800 debit (cash at bank)
Real-world exampleAt month-end the cashier balances the cash book, carrying down an 800 debit bank balance representing funds at the bank.
Common follow-ups: What does a credit bank balance b/d indicate? | What are c/d and b/d?
Bank ReconciliationTrial BalanceCash Book & Petty Cash