Let us make in-depth study of the meaning and features of cash book of original entry.
Cash book is a primary book of original entry and includes all cash transactions of the enterprise in a chronological order. Cash book is a book of original entry in which transactions involving cash are to be recorded as and when they occur. It has two sides viz. ‘Debit Side’ in which all receipts are to be recorded and ‘Credit Side’ in which all payments are to be recorded.
Features of Cash Book:
The main features of the cash book are as under:
(i) Records Only Cash and Bank Transactions:
In the cash book, the transactions relating to cash and/or bank are recorded. Non-cash transactions cannot be recorded in the cash book.
(ii) Transactions are Recorded in the Chronological Order:
All transactions are recorded in the cash book in the chronological order i.e. in order of their occurrence.
(iii) Cash Column cannot have Credit Balance:
Cash column of the cash book cannot have the credit balance which means that credit side of the cash column cannot exceed the debit side of the cash column. This is so because the enterprise cannot pay more than what it has. It means that cash column of the cash book must have a debit balance or no balance, when total receipts are equal to the total payments, but no credit balance in any case.
(iv) Similar to Journal:
Like a journal, the transactions (only cash/bank) are recorded at the time of their origin and in order of their occurrence. Cash book also contains column for ledger folio and transactions are recorded with their brief narration.
(v) Similar to Ledger:
Format of cash book resembles that of a ledger. Like any ledger, cash book has two sides viz. debit side and credit side. Debit side is known as receipt side and credit side is known as payment side. The words ‘To’ and ‘By’ are used in the cash book too. Cash book is also balanced and like any ledger account, balance of cash book is carried forward and brought forward periodically.
(v) Journal and Ledger Both:
The transactions involving receipt and payment of cash/bank are recorded in the cash book. The purpose of a journal as well as a ledger is served by it. Cash transactions are recorded in cash book with brief narration and not in journal, because cash book is also considered as a book of original entry.
The transactions appearing in the cash book are directly posted to their relevant ledger accounts. Posting to cash account is not required because it is also a ledger account. Unlike a journal, where two postings are required for entries recorded in it, only one posting is required for all the transactions recorded in cash book.
(vi) Subsidiary Book as Well as Principal Book:
Unlike other subsidiary books, cash book is also a principal book. Other subsidiary books viz. sales book and purchase book etc. provide incomplete information in the sense that these books record only credit transactions and respective ledger accounts are to be prepared to calculate total sales and purchases.
However, when cash book is prepared, there is no need to prepare cash account because question of recording credit transactions does not arise, as it records only cash transactions. Hence, the balances of cash book are directly entered in the trial balance.
Thus, cash book shows the complete information relating to cash transactions of the enterprise at the end of accounting year, and at any point of time. It is therefore, known as a subsidiary book and a principal book.