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.

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