(A) What is cash transactions?

A cash transaction is a transaction where payment is settled immediately.

A cash transaction is the opposite of a credit transaction.

Cash transactions are classified into cash receipts and cash payments.

Cash transactions also include:

Keep in mind (KIM)

(B) Meaning of cash book

Cash book is a sub-division of a journal.

It records all transactions related to cash in the cash book.

There are different types of cash books.

They are single column cash book, double column cash book, triple column cash book and petty cash book.

In large firms, generally cash book is divided into two parts.

They are cash disbursement journal and cash receipts journal.

In cash disbursement journal, all cash payments like operating expenses, account payable, petty cash etc are recorded.

In cash receipt journal, all cash receipts like goods sold in cash, account receivable, sales of assets etc are recorded.

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(C) Types of cash book

There are four types (kinds) of cash books; they are:

(1) Simple or single column cash book

(2) Double column cash book

(3) Triple column cash book

(4) Petty cash book

(D) Advantage and features of cash book

(i) Advantages of cash book

The major advantages of cash book are as follows:

(a) It prevents duplication of work of cash transaction in journal and posting into the ledger.

(b) Cash as well as bank transactions are recorded in cash book.

(c) It is possible to find out daily cash in hand and cash at bank balance.

(d) It helps to prepare cash budget and avoids excess or shortage of cash.

(e) Frauds related to cash are to be minimized and can be detected at an early stage

(ii) Features of cash book

The major features of cash book are as follows:

(a) Only cash and bank transactions are recorded in cash book.

(b) It performs the role of both journal and the ledger.

(c) Receipts are recorded on the debit side and payments on the credit side.

(d) It records only one aspect of the transaction viz cash or bank.

(d) Transactions are recorded in chronological order.

(e) Cash column must have debit balance but bank column may have debit or credit balance; credit bank balance is overdraft.

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