Chapter 5 — Cash Book

Every business receives cash from customers and pays cash to suppliers, employees and others many times a day. The cash book is the book in which all these receipts and payments are recorded as they happen. It is a subsidiary book, a book of original entry, because cash transactions are written in it first, from cash memos, receipts, vouchers and cheque counterfoils, before being posted anywhere. Since cash transactions are the most numerous of all, the cash book is the busiest book in the office and is kept by a separate officer, the cashier.

The dual nature of the cash book. Unlike the purchases book or the sales book, the cash book is ruled and kept exactly like a ledger account. It has a debit side on the left for receipts and a credit side on the right for payments; it is balanced at the end of the day, week or month; and its balance shows the cash in hand. For this reason, when a cash book is kept, no separate cash account is opened in the ledger. The cash book is the cash account. It is therefore said to be both a journal and a ledger, or a book of original entry that also serves as a book of final entry. The same is true of the bank column of a double or triple column cash book: it serves as the bank account.

Why receipts are debits. Cash is a real account, and the rule for real accounts is debit what comes in, credit what goes out. Cash received comes in, so it is entered on the debit side; cash paid goes out, so it is entered on the credit side. The receipts side always totals more than or equal to the payments side, because a business cannot pay out more cash than it has; the cash column therefore always shows a debit balance or nil, never a credit balance.

Features of the cash book

• It records only cash and bank transactions; credit transactions are never entered.
• Receipts are recorded on the debit side and payments on the credit side.
• Entries are made in chronological order.
• It is both a subsidiary book and a ledger account, so it needs no separate cash account.
• Its cash column can show only a debit balance; its bank column may show a credit balance, meaning an overdraft.
• It is balanced at regular intervals and the balance is verified by counting the cash.

Advantages of the cash book

• All cash information is in one place, and cash in hand is known at any moment.
• Counting the till against the book balance detects errors and shortages daily.
• Entering cash transactions straight into the cash book saves the labour of journalising them and then posting to a cash account.
• The cashier's work is separated from the ledger clerk's, which is an internal check against fraud.

Kinds of cash book. Depending on the needs of the business, the cash book may be a single column cash book (cash only), a double column cash book (cash and bank, or cash and discount), a triple column cash book (cash, bank and discount), or a petty cash book for small payments. The chapter takes these in turn.

The single column cash book is the simplest form. It has one amount column on each side and records cash transactions only. Bank transactions, if any, are recorded through a bank account in the ledger, just like any other account. It suits a very small business that deals mostly in cash.

Ruling

Rules for writing

• Begin with the opening cash balance on the debit side as To Balance b/d.
• Enter every cash receipt on the debit side, writing To followed by the name of the account from which the cash came: To Sales A/c for cash sales, To Ravi for cash from Ravi, To Commission A/c for commission received.
• Enter every cash payment on the credit side, writing By followed by the name of the account to which the cash went: By Purchases A/c, By Rent A/c, By Mohan.
• At the end of the period, total both sides, find the difference and write it on the credit side as By Balance c/d; then bring it down on the debit side as To Balance b/d for the next period.
• Never enter a credit transaction, a cheque, or a bank transaction in the single column cash book.

Illustration. Prepare the single column cash book of Ramu for March 2026: Mar 1, cash in hand Rs 15,000; Mar 3, cash sales Rs 8,000; Mar 5, paid to Suresh Rs 4,000; Mar 8, purchased goods for cash Rs 6,000; Mar 12, received from Kiran Rs 3,500; Mar 15, paid wages Rs 2,000; Mar 20, sold goods to Anil on credit Rs 5,000; Mar 25, paid rent Rs 3,000; Mar 28, received commission Rs 1,200; Mar 31, paid salaries Rs 5,000.

The credit sale to Anil on 20 March is not entered, because no cash moved; it belongs to the sales book. Receipts total 27,700, payments total 20,000, and the closing cash is Rs 7,700.

Posting. Each entry on the debit side is posted to the credit side of the account named: sales account By Cash 8,000; Kiran By Cash 3,500; commission By Cash 1,200. Each entry on the credit side is posted to the debit side of the account named: Suresh To Cash 4,000; purchases To Cash 6,000; wages To Cash 2,000; rent To Cash 3,000; salaries To Cash 5,000. The cash book itself is the cash account, so nothing more is posted.

Most businesses keep a bank account and make many payments by cheque and many deposits into the bank. Recording all of these through a separate bank account in the ledger is tedious, and it separates the two forms of money that the cashier handles together. The solution is the double column cash book with a cash column and a bank column on each side. The bank column serves as the bank account, so no bank account is opened in the ledger.

Ruling

Which column? Cash received or paid in notes and coins goes in the cash column. Money going into the bank (deposits, cheques received and deposited, interest allowed by the bank, direct payments by customers into the account) goes in the bank column on the debit side. Money going out of the bank (cheques issued, bank charges, withdrawals, standing instructions honoured) goes in the bank column on the credit side.

Cheques received. When a cheque is received from a customer and deposited into the bank the same day, it is entered directly in the bank column on the debit side: To Customer, bank column. If the cheque is received on one day and deposited on a later day, it is first entered in the cash column on the debit side on the day of receipt, and on the day of deposit a contra entry (see the next topic) moves it from cash to bank. Examination questions usually say deposited the same day or simply received a cheque, in which case it is treated as deposited the same day and entered in the bank column.

Cheques issued. A cheque issued to a creditor is entered in the bank column on the credit side: By Creditor, bank column. Payment of expenses by cheque is likewise credited in the bank column.

Bank charges, interest and direct transactions. Charges deducted by the bank: credit side, bank column, By Bank Charges A/c. Interest allowed by the bank: debit side, bank column, To Interest A/c. A customer who pays directly into the firm's bank account: debit side, bank column, To Customer. A standing instruction, such as an insurance premium paid by the bank: credit side, bank column, By Insurance A/c.

Balancing. Each column is balanced separately. The cash column always shows a debit balance. The bank column may show a debit balance (money in the bank) or a credit balance (bank overdraft), depending on which side is larger. Both balances are carried down to the next period in their own columns.

Short illustration. Apr 1: cash in hand Rs 5,000, bank balance Rs 20,000. Apr 4: received a cheque from Rao Rs 8,000, deposited the same day. Apr 8: paid Sharma by cheque Rs 6,000. Apr 10: cash sales Rs 4,000. Apr 15: paid rent in cash Rs 2,500. Apr 20: bank charges Rs 100. Apr 25: paid salaries by cheque Rs 7,000.

Cash: 5,000 + 4,000 − 2,500 = 6,500. Bank: 20,000 + 8,000 − 6,000 − 100 − 7,000 = 14,900. Each column balances on its own.

When the cash book has both a cash column and a bank column, some transactions affect both. Cash deposited into the bank reduces cash and increases bank; cash withdrawn from the bank for office use increases cash and reduces bank. Both the debit and the credit of such a transaction fall within the cash book itself, one in the cash column and the other in the bank column. Such an entry is called a contra entry, from the Latin word meaning opposite, and it is marked with the letter C in the L.F. column on both sides to show that no posting to the ledger is required.

Cash deposited into the bank. Bank comes in, cash goes out. Debit side: To Cash A/c in the bank column. Credit side: By Bank A/c in the cash column. Both entries carry C in the L.F. column.

Cash withdrawn from the bank for office use. Cash comes in, bank goes out. Debit side: To Bank A/c in the cash column. Credit side: By Cash A/c in the bank column. Both marked C.

Cheque received earlier and deposited later. On the day of receipt the cheque was entered in the cash column on the debit side (To Customer). On the day of deposit, a contra entry moves it: debit side, To Cash A/c in the bank column; credit side, By Bank A/c in the cash column.

What is not a contra entry. Cash withdrawn from the bank for the proprietor's personal use is not a contra entry, because the cash does not come into the business; it is a drawing. It is entered on the credit side, bank column, By Drawings A/c, and posted to drawings account. Similarly, a cheque issued to a creditor, or a customer's cheque deposited, affects only one column and is posted normally.

Why no posting is needed. A contra entry's debit is in one column of the cash book and its credit is in the other column of the same book. Since the cash column is the cash account and the bank column is the bank account, both aspects of the transaction have already been recorded in ledger accounts. Posting it again would duplicate it.

Illustration. May 1: cash Rs 3,000, bank Rs 12,000. May 3: deposited cash into bank Rs 2,000. May 7: cash sales Rs 9,000. May 9: deposited Rs 8,000 into bank. May 14: withdrew from bank for office use Rs 1,500. May 18: withdrew from bank for personal use Rs 2,000. May 22: received a cheque from Latha Rs 4,000, not deposited until May 25. May 25: deposited Latha's cheque.

Cash: 3,000 + 9,000 + 1,500 + 4,000 − 2,000 − 8,000 − 4,000 = 3,500. Bank: 12,000 + 2,000 + 8,000 + 4,000 − 1,500 − 2,000 = 22,500. The four contra pairs are marked C and are not posted; the drawings entry of May 18 is posted to drawings account.

When a firm receives payment from a debtor, it often allows a small cash discount for prompt payment, and when it pays a creditor it often receives one. These discounts happen at the moment of receipt or payment, so the cashier is the person who knows about them. To let him record them at once, a third column, the discount column, is added on each side of the cash book. The result is the triple column cash book, with cash, bank and discount columns on both sides.

Ruling

Discount allowed (to debtors) is entered in the discount column on the debit side, on the same line as the cash or cheque received from that debtor. Discount received (from creditors) is entered in the discount column on the credit side, on the same line as the cash or cheque paid to that creditor.

The discount columns are not balanced. This is the point on which most students slip. The discount columns are memorandum columns: they are not part of the cash account, they represent no cash movement, and the discount on the debit side has nothing to do with the discount on the credit side. So the two discount columns are only totalled, never balanced against each other. The total of the debit discount column is the total discount allowed for the period; the total of the credit discount column is the total discount received.

Posting the discount columns. Each amount in the debit discount column is posted, along with the cash or bank amount on the same line, to the credit of the debtor's account, so that the debtor is credited with the full amount settled. The total of the debit discount column is posted to the debit of discount allowed account (a loss). Each amount in the credit discount column is posted, with the cash or bank amount on the same line, to the debit of the creditor's account. The total of the credit discount column is posted to the credit of discount received account (a gain). In this way the discount columns complete their double entry: individual debtors credited, discount allowed debited; individual creditors debited, discount received credited.

Computing discount from full settlement. If a debtor who owes Rs 10,000 pays Rs 9,800 in full settlement, the discount allowed is Rs 200. If a creditor is paid Rs 14,700 in full settlement of Rs 15,000, discount received is Rs 300. If the discount is given as a percentage, it is computed on the amount due, and the cash is the balance.

Illustration of lines with discount. Jun 6: received from Prasad Rs 7,800 by cheque in full settlement of Rs 8,000. Jun 12: paid Gopal Rs 5,850 in cash, discount received Rs 150.

Prasad's account is credited By Bank 7,800 and By Discount Allowed 200, total 8,000, closing his debt. Gopal's account is debited To Cash 5,850 and To Discount Received 150, total 6,000. At the month end the debit discount column total goes to the debit of discount allowed account and the credit discount column total to the credit of discount received account.

Older form. In some textbooks the double column cash book means cash and discount columns without a bank column. The treatment of the discount columns is the same as described here; only the bank column is absent.

Cheques create most of the difficult entries in a cash book question, because a cheque may be received, held, deposited, passed on to someone else, or returned unpaid. Each event has a definite entry.

Cheque received and deposited the same day. Debit side, bank column, To Customer. This is the default treatment when a question says received a cheque without more.

Cheque received and deposited later. On receipt: debit side, cash column, To Customer, because an undeposited cheque is treated as cash in hand. On deposit: a contra entry, To Cash in the bank column (debit) and By Bank in the cash column (credit), marked C.

Cheque received and endorsed to a creditor. If the firm hands a customer's cheque over to its own creditor instead of depositing it, the cheque was received as cash and paid away as cash: on receipt, debit side, cash column, To Customer; on endorsement, credit side, cash column, By Creditor. The bank column is not touched, because the cheque never entered the firm's bank account.

Cheque deposited and dishonoured. If a customer's cheque that was deposited is returned unpaid by the bank (for want of funds, a wrong signature, or any other reason), the bank reverses the credit it gave. The firm must reverse its entry too: credit side, bank column, By Customer, with the narration cheque dishonoured. The customer's account is then debited again, restoring his debt. If discount had been allowed on that cheque, the discount is also cancelled by a journal proper entry debiting the customer and crediting discount allowed. Bank charges for the dishonour, if any, are entered By Bank Charges in the bank column and are usually recovered from the customer by debiting his account.

Cheque issued and dishonoured. If a cheque the firm issued to a creditor is dishonoured, the payment never left the bank; the entry is reversed by debit side, bank column, To Creditor, and the creditor's account is credited back.

Cheque issued but not yet presented needs no special entry in the cash book; it was recorded when issued. The difference it creates between the cash book and the bank statement is the subject of the bank reconciliation chapter.

Illustration. Jul 2: received a cheque from Mohan Rs 6,000 in full settlement of Rs 6,200, deposited the same day. Jul 5: received a cheque from Nagesh Rs 3,000. Jul 8: endorsed Nagesh's cheque to Bhaskar, a creditor, in full settlement of Rs 3,100. Jul 10: Mohan's cheque returned dishonoured by the bank. Jul 12: received cash from Mohan Rs 6,200.

On dishonour, the discount of Rs 200 allowed on Jul 2 is cancelled by a journal proper entry: Mohan A/c Dr 200, To Discount Allowed A/c 200. Mohan's full debt of Rs 6,200 is thereby restored, and his cash payment on Jul 12 clears it. Nagesh's cheque passed through the cash column only, in and out, and Bhaskar's account was debited with 3,000 cash plus 100 discount.

A bank may allow a customer to draw cheques for more than the balance in his account, up to an agreed limit. The excess drawn is a loan from the bank called a bank overdraft. In the cash book, an overdraft appears as a credit balance in the bank column: the payments through the bank have exceeded the receipts into it, so the credit side of the bank column is larger than the debit side.

Opening with an overdraft. If the period opens with an overdraft, the opening balance is written on the credit side in the bank column as By Balance b/d. The cash column's opening balance is still on the debit side as To Balance b/d, because cash in hand cannot be negative. The two opening balances therefore sit on opposite sides.

Closing with an overdraft. When balancing the bank column, if the credit total exceeds the debit total, the difference is written on the debit side as To Balance c/d, so that both sides total the same; it is then brought down on the credit side as By Balance b/d, showing that the firm owes the bank.

Interest on overdraft charged by the bank is entered on the credit side in the bank column as By Interest on Overdraft A/c (or By Bank Interest A/c), because it increases the amount owed to the bank. It is posted to the debit of interest account as an expense.

Illustration. Sep 1: cash in hand Rs 4,000; bank overdraft Rs 10,000. Sep 4: cash sales Rs 6,000. Sep 6: deposited cash into bank Rs 5,000. Sep 10: paid Rajan by cheque Rs 8,000. Sep 15: received a cheque from Devi Rs 12,000, deposited. Sep 20: paid salaries by cheque Rs 9,000. Sep 25: bank charged interest on overdraft Rs 300. Sep 30: paid wages in cash Rs 2,000.

Bank column: debit side 5,000 + 12,000 = 17,000; credit side 10,000 + 8,000 + 9,000 + 300 = 27,300; the credit side is larger by 10,300, so the closing position is an overdraft of Rs 10,300, written To Balance c/d on the debit side and brought down on the credit side. Cash column: 4,000 + 6,000 − 5,000 − 2,000 = 3,000 debit.

In an examination, the word overdraft in the opening data is the signal to put that balance on the credit side. Students who put it on the debit side by habit get every bank figure wrong thereafter. In the balance sheet, a bank overdraft is shown as a current liability, never as a negative asset.

The rules for closing a triple column cash book at the end of a period are mechanical but must be applied exactly.

Balancing

• Cash column: total both sides; the debit total is always larger; write the difference on the credit side as By Balance c/d; total both sides to the same figure; bring the balance down on the debit side as To Balance b/d.
• Bank column: total both sides; if the debit total is larger, write the difference on the credit side as By Balance c/d and bring it down on the debit side (a favourable balance); if the credit total is larger, write the difference on the debit side as To Balance c/d and bring it down on the credit side (an overdraft).
• Discount columns: total each column separately and write the total at the foot; do not balance them, do not carry anything down, and do not add them across to the cash and bank columns.

Posting

• Every entry on the debit side (other than contra entries and balances) is posted to the credit of the account named, with the cash or bank amount, as By Cash or By Bank.
• Every entry on the credit side (other than contra entries and balances) is posted to the debit of the account named, as To Cash or To Bank.
• Where a discount appears on a line, the debtor or creditor is also posted with the discount amount: a debtor is credited By Discount Allowed, a creditor is debited To Discount Received.
• The total of the debit discount column is posted to the debit of discount allowed account as To Sundries as per cash book.
• The total of the credit discount column is posted to the credit of discount received account as By Sundries as per cash book.
• Contra entries, marked C, are not posted.
• The cash and bank balances are not posted; the cash book is the cash and bank account, and the balances go straight to the trial balance.

Worked posting from a few lines. Suppose the cash book contains: debit side, To Prasad, discount 200, bank 7,800; To Sales, cash 9,000; To Cash (C), bank 5,000; credit side, By Gopal, discount 150, cash 5,850; By Rent, bank 3,000; By Bank (C), cash 5,000. Discount columns total 200 (debit) and 150 (credit).

Checking the double entry. Take Prasad: he is credited with 8,000 in total; the debits are 7,800 in the bank column (part of the bank account) and 200 in discount allowed account. Take Gopal: he is debited with 6,000; the credits are 5,850 in the cash column and 150 in discount received. Every line balances. This is why the discount columns can be memorandum columns and yet keep double entry intact: their totals are posted to the discount accounts, and their individual amounts are posted with the party.

Frequency. The cash columns are balanced daily in most businesses, because the cashier must agree the book balance with the physical cash in the till at the close of business. The bank column is balanced when the bank statement is received or at the month end. In an examination, balance at the date the question gives, usually the end of the month.

Prepare a triple column cash book of Sharada Traders for October 2026 and balance it.

• Oct 1: Cash in hand Rs 8,000; bank balance Rs 25,000.
• Oct 2: Cash sales Rs 12,000.
• Oct 4: Deposited cash into bank Rs 10,000.
• Oct 6: Received a cheque from Varma for Rs 9,700 in full settlement of Rs 10,000, deposited the same day.
• Oct 8: Paid Rao and Sons by cheque Rs 14,550 in full settlement of Rs 15,000.
• Oct 10: Purchased goods for cash Rs 5,000.
• Oct 12: Withdrew from bank for office use Rs 3,000.
• Oct 15: Received cash from Lalitha Rs 4,850, discount allowed Rs 150.
• Oct 18: Paid rent by cheque Rs 6,000.
• Oct 20: Varma's cheque returned dishonoured by the bank.
• Oct 22: Withdrew from bank for personal use Rs 2,000.
• Oct 25: Received a cheque from Varma Rs 10,000, deposited.
• Oct 28: Paid Kishore in cash Rs 2,900, discount received Rs 100.
• Oct 30: Bank charges Rs 150.
• Oct 31: Paid salaries in cash Rs 7,000.

Working. Cash column: receipts 8,000 + 12,000 + 3,000 + 4,850 = 27,850; payments 10,000 + 5,000 + 2,900 + 7,000 = 24,900; balance 2,950. Bank column: receipts 25,000 + 10,000 + 9,700 + 10,000 = 54,700; payments 14,550 + 3,000 + 6,000 + 9,700 + 2,000 + 150 = 35,400; balance 19,300. Discount allowed total 450 (300 + 150); discount received total 550 (450 + 100).

The dishonour and its discount. When Varma's cheque bounced on Oct 20, the Rs 300 discount allowed on Oct 6 was also cancelled, by a journal proper entry Varma A/c Dr 300, To Discount Allowed A/c 300; it is not touched in the cash book, and the debit discount column total of 450 still stands as recorded, with the reversal reaching discount allowed account from the journal. Varma's account: credited 9,700 + 300 on Oct 6, debited 9,700 on Oct 20 (from the cash book) and 300 (from the journal), credited 10,000 on Oct 25; net, his Rs 10,000 debt is cleared.

The drawings withdrawal on Oct 22 is in the bank column only and is posted to drawings; it is not a contra entry because the cash did not come into the business.

A business makes a great many small payments every day: postage, bus fares, tea for visitors, stationery, cleaning, minor repairs, a courier charge. If every one of these were entered in the main cash book, that book would be crowded with trivial items and the chief cashier's time would be wasted. The solution is to hand a small fund to a junior clerk, the petty cashier, who pays the small expenses from it and records them in a separate book, the petty cash book. The word petty comes from the French petit, meaning small.

The imprest system. The most common way of running petty cash is the imprest system. At the beginning of a period, say a month, the chief cashier gives the petty cashier a fixed sum, called the imprest or float, estimated to cover the period's small expenses, for instance Rs 3,000. The petty cashier pays expenses from it during the month, obtaining a voucher or receipt for each. At the end of the month he presents the petty cash book with the vouchers to the chief cashier, who checks it and reimburses him exactly the amount spent. The petty cashier thus starts every period with the same fixed sum, the imprest. If Rs 2,450 was spent, Rs 2,450 is reimbursed and the fund is back to Rs 3,000.

Advantages of the imprest system

• The main cash book is relieved of many small entries.
• The chief cashier is freed for more important work.
• The petty cashier cannot spend more than the imprest, so the loss from any misuse is limited.
• Every payment is checked by the chief cashier at the time of reimbursement, which is a control against fraud.
• Expenses are classified as they are paid, so posting is easy.
• The petty cashier learns responsibility on a small scale.

Analytical (columnar) petty cash book. The book has a receipts column on the left for the imprest and reimbursements, and on the right a total payments column followed by a set of analysis columns, one for each common head of expense: postage and telegrams, stationery, conveyance, cartage, refreshment, sundries, and a ledger accounts column for the occasional payment to a person. Each payment is entered once in the total column and once in the appropriate analysis column. At the end of the period all the columns are totalled; the total of the analysis columns must equal the total payments column, which is the arithmetical check.

Balancing. The difference between the receipts column and the total payments column is the cash left with the petty cashier; it is written as Balance c/d and brought down. Then the reimbursement for the amount spent is entered in the receipts column to restore the imprest.

Recording in the main books. When the chief cashier gives the imprest or reimbursement, the main cash book shows By Petty Cash A/c on the credit side. The petty cash book, unlike the main cash book, is usually treated as a subsidiary book only, and a petty cash account is kept in the ledger, debited with the amounts handed over. At the end of the period the totals of the analysis columns are posted to the debit of the respective expense accounts (postage, stationery, conveyance, and so on), and the total of all payments is credited to petty cash account. The petty cash account then shows as its balance the cash with the petty cashier, which appears in the balance sheet as part of cash.

Non-imprest system. Occasionally the petty cashier is simply given a round sum from time to time without reference to what was spent. This is weaker in control, because there is no fixed fund to check against, and it is rarely used in well-run offices.

Prepare an analytical petty cash book on the imprest system from the following, the imprest being Rs 2,500 received on 1 November 2026. Analysis columns: postage, stationery, conveyance, refreshment, sundries.

• Nov 2: Postage stamps Rs 150.
• Nov 4: Auto fare Rs 120.
• Nov 6: Tea for customers Rs 90.
• Nov 8: Registers and pens Rs 320.
• Nov 10: Courier charges Rs 180.
• Nov 12: Bus fare for peon Rs 60.
• Nov 15: Cleaning material Rs 140.
• Nov 18: Speed post Rs 110.
• Nov 20: Coffee for staff meeting Rs 130.
• Nov 22: Photocopy paper Rs 200.
• Nov 25: Taxi to railway station Rs 250.
• Nov 27: Repair of office chair Rs 210.
• Nov 29: Envelopes Rs 80.

Check: 440 + 600 + 430 + 220 + 350 = 2,040, equal to the total payments column. Balance with the petty cashier = 2,500 − 2,040 = Rs 460. Reimbursement of Rs 2,040 on 1 December restores the imprest to Rs 2,500.

Posting. Postage A/c Dr 440; Stationery A/c Dr 600; Conveyance A/c Dr 430; Refreshment (or Entertainment) A/c Dr 220; Sundry Expenses A/c Dr 350; To Petty Cash A/c 2,040. The main cash book shows By Petty Cash 2,500 on 1 November and By Petty Cash 2,040 on 1 December, both posted to the debit of petty cash account. Petty cash account: debits 2,500 + 2,040 = 4,540; credit 2,040; balance 2,500, which is the imprest with the petty cashier after reimbursement.

Notice how the classification into columns makes the posting effortless: five expense accounts receive one debit each for the month instead of thirteen scattered entries.

Cash book questions are long but formulaic, and most lost marks trace to a few recurring slips. This checklist covers them.

Sorting errors

• Entering a credit sale or credit purchase in the cash book. If no cash, cheque or bank is mentioned, the transaction does not belong here.
• Missing a bank transaction because it is described indirectly: bank charges, interest allowed by bank, insurance premium paid by bank under standing instruction, and a customer paying directly into the bank account all go in the bank column.

Column errors

• Putting a cheque received and deposited into the cash column. Unless the question says it was deposited later, a cheque received goes in the bank column.
• Putting a cheque issued into the cash column. Any payment by cheque is in the bank column.
• Putting discount into the cash or bank column. Discount goes only in the discount column, on the same line as the related receipt or payment.
• Confusing discount allowed (debit side, with receipts from debtors) and discount received (credit side, with payments to creditors).

Contra errors

• Forgetting to make both halves of a contra entry, or forgetting to mark C.
• Treating a withdrawal for personal use as a contra entry; it is drawings.
• Posting contra entries to the ledger; they are never posted.

Balancing errors

• Balancing the discount columns. They are totalled only.
• Placing an opening overdraft on the debit side. Overdraft is a credit balance in the bank column.
• Carrying down an overdraft on the wrong side: c/d on the debit side, b/d on the credit side.
• Totalling the cash and bank columns together; each column is balanced separately.

Cheque errors

• Omitting the reversal on dishonour: a dishonoured cheque received is entered on the credit side in the bank column, By Customer.
• Forgetting that discount allowed on a dishonoured cheque is cancelled through the journal proper.
• Passing an endorsed cheque through the bank column; it goes in and out through the cash column.

Technique

• Rule the full triple column format first, with dates on both sides, and write the opening balances before anything else.
• Work through the transactions in date order, deciding for each: which side, which column, any discount.
• Compute discounts from the phrase in full settlement by subtracting the amount paid from the amount due.
• Total the discount columns, then balance cash, then balance bank; write c/d and b/d on the correct sides.
• Add a short note for any transaction not entered (credit transactions) and for the journal proper entry that cancels discount on a dishonoured cheque.
• Verify the cash balance by a quick independent sum of receipts less payments before ruling off.

A triple column cash book that is ruled correctly, sorted correctly, and balanced with the discount columns merely totalled will earn full marks even if a single arithmetic slip creeps in, because examiners award marks for method. The reverse, correct arithmetic in a wrong format with balanced discount columns, loses most of them.