Cash book is a separate book that is used to record cash and bank transactions at one place. If cash book is used, then the transactions are recorded directly in the cash book and there is no need to maintain ledger account for cash and bank. In this all received cash and bank transactions are recorded on the debit side and all paid cash and bank transactions are recorded on the credit side.
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Advantages of Cash Book
Following are the advantages of cash book:
1. Separate Book:
The advantage of cash book is that it is a separate book dedicated only to cash and bank transactions using which all the cash and bank transactions can be recorded at one place. By using double-column cash book, cash and bank transactions can be recorded together in a single book.
2. Easy Management:
It is easy to manage cash and bank transactions using Cash Book as it provides the facility to manage all cash and bank transactions together at one place. If we manage cash and bank transactions in a normal way, then it can be difficult because passing journal entry and recording them in ledger account is difficult as compared to cash book.
3. Debit and Credit:
In cash book, the rule of real account applies due to which all received transactions are recorded on the debit side and all paid transactions are recorded on the credit side. By looking at these recorded transactions it can be easily understood which transactions have been received and which transactions have been paid.
4. Direct Entry:
In cash book, transactions are recorded without making journal entries, this is because in this the transactions are recorded directly. For example, when a cash payment is made it is recorded directly in the cash book. The cash book is closed on a daily basis and when it is closed a journal entry is passed.
5. Error Reduction:
Cash book helps in reducing errors as entries are recorded directly in it thereby reducing the chances of error. If we record transactions through journals and ledgers the chances of error may increase as it is a complex process.
6. Fast:
Cash book helps to manage cash and bank transactions faster as transactions are recorded directly in it. For example, when cash is paid, it is directly recorded in it, similarly when cash is received, it is also directly recorded in it.
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QNA/FAQ
Q1. Is cash book a separate book?
Ans: Yes, it is a separate book in which only cash and bank transactions are recorded.
Q2. Is cash book helpful in reducing errors?
Ans: Yes, it helps in reducing the error as transactions are recorded directly in it and its concept is very simple.
Q3. Are transactions recorded directly in the cash book?
Ans: Yes, all cash and bank transactions are recorded directly in the cash book, if the cash book is created for cash and bank.
Q4. Which transactions are recorded on the debit side of the cash book?
Ans: All received transactions are recorded on the debit side of the cash book. Like cash sales, etc.
Q5. Which transactions are recorded on the credit side of the cash book?
Ans: All paid transactions are recorded in the credit side of the cash book. Like cash purchases, etc.
Q6. Write the advantages of cash book.
Ans: Following are the advantages of cash book:
1. Cash book is a separate book.
2. Cash book helps in easy management of transactions.
3. Debit and credit rules apply in cash book.
4. Direct entry is made in the cash book.
5. Cash book helps in reducing errors.
6. Cash book helps to manage transactions faster.
