Is a cash book a journal or ledger? Distinguish between cash a/c and cash book.

 Is a cash book a journal or ledger ? Distinguish between cash a/c and cash book. 


A cash book is both a journal as well as a ledger. The cash book is a journal because it records the cash transactions from the source document for the first time and then these are posted in the respective ledger accounts. The cash book is a ledger in the sense that it serves the purpose of a cash account also. 

To make the concept simpler, I would like to familiarize you with the meaning of journals and ledgers, which shall help in determining the reasons for a cash book to be both a journal as well as a ledger.

Journal

A journal is a descriptive financial record of a business that is used for future reconciliation as well as a transfer to other books of accounts such as the ledger. It is a book of original entries.

Cashbook is considered to be a journal because all the cash/bank receipts and payments are recorded in this book in a descriptive form similar to journal posting.

Ledger

In simple words, a ledger refers to recording individual accounts in a summarized form that are posted from a journal. It is a book of principal entries.

A cash book is considered to be a ledger because all the cash transactions that are made during a particular financial period are recorded in this book in chronological order. When a cash book is prepared there is no need for a cash a/c as the book serves the same purpose and therefore can be used as a substitute.

The major differences between a cash account and cash book are as follows −

Cash account

Cash book


  • It is an account in a ledger.

  • Transactions are made from journals.

  • Serves the purpose of a ledger.

  • Dependent on journal daybooks.

  • One type of cash account.

  • Represents only cash balances.

  • Journal folio.

  • Cash transactions are recorded in the journal and then posted in a cash account.

  • Don’t have any narrations.


  • It is a separate book.

  • Transactions are recorded directly.

  • Serves as both journal and ledger.

  • Independent of other books.

  • Three types of cash books.

  • Cash balances, bank balances, discount allowed, discount received.

  • Ledger folio.

  • Transactions are recorded directly.

  • It has narration.

Popular posts from this blog

INTRODUCTION TO SALES MANAGEMENT, BCOM, BBA, MBA

Image
INTRODUCTION TO SALES MANAGEMENT Sales management can be seen as a segment of the organization’s marketing mix . It deals with the formation of sales strategies; product merchandising and pricing; sales promotion activities; distribution function; and planning, staffing, supervising, motivating and controlling of sales personnel to attain the desired sales objectives. Nature of Sales Management To understand the concept of sales management clearly, we must go through its following characteristics: Goal-Oriented : Similar to other management activities, sales management also has a specific purpose and intended for the achievement of specified goals or objectives. Continuous Process : The sales manager needs to perform sales management functions regularly, and this process is never-ending. Systematic Approach : It is an organized way of handling the sales function of the company where every problem has a defined and proven solution. Relationship Selling : The salespeople make efforts to ...
Read more

WHAT IS TRANSACTIONS IN ACCOUNTS? HOW TRANSACTIONS ARE DIFFERENT FROM EVENTS? OR DIFFERENCE BETWEEN TRANSACTION AND EVENTS IN ACCOUNTS?

In our business there are different events, some events are measurable in terms of money but some events are not measurable in terms of money . The events which are measurable in terms of money they are termed as transactions.  For example Purchase of goods from Mr. Ram for Rs 20,000, is an example of transaction, because the transaction is measurable in terms of money. Other examples can be , Salary paid to employees, interest received from bank on bank deposits, sales of goods to Mr. Karan for Rs 23,000 etc.  Whereas , some events are there which is not measurable in terms of money, such as appointing an employee for a monthly salary of Rs 40,000 , it is only an event not a transaction because we haven't received any services from him not we haven't make any payment to him. Another example can be , placing order for goods , we haven't make any payment not we have received any goods, so it's an event not a transaction. So only transactions are recorded in accounts .
Read more