Page 1
211
LESSON 14:
CASH BOOK, PASS BOOK, BANK
RECONCILIATION STATEMENT
Dr. Jyotsna Sethi, Rekha Rani
STRUCTURE
14.1 Introduction
14.2 Objectives
14.3 Cash Book
14.4 Types of Cash Book
14.4.1 Simple Cash Book
14.4.2 Two Column Cash Book
14.4.3 Three Column Cash Book
14.5 Petty Cash Book.
14.5.1. Imprest System of Petty Cash Book.
14.5.2 Advantages of Petty Cash Book
14.6 Pass Book
14.7. Bank Reconciliation Statement
14.7.1 Meaning
14.7.2. Causes for difference between Cash Book Balance and Pass
Book Balance.
14.7.3. Need and importance of Bank Reconciliation Statement
14.7.4 Procedure for preparation of Bank Reconciliation Statement.
14.8. Summary
14.9. Glossary
14.10. Self Assessment Questions
14.11. Answer to check your progress
14.12. Further Readings
14.1. INTRODUCTION
Every entrepreneur should have knowledge of cash book and pass book as
from these books, he may check how much balance is available to him for
meeting his expenses and liabilities and what are the details of receipts and
payments of a particular period. With the details of payments it can be
checked that whether the payments are of reasonable amount or not. If the
expanses are unreasonably high he may take steps to control them. An
Page 2
211
LESSON 14:
CASH BOOK, PASS BOOK, BANK
RECONCILIATION STATEMENT
Dr. Jyotsna Sethi, Rekha Rani
STRUCTURE
14.1 Introduction
14.2 Objectives
14.3 Cash Book
14.4 Types of Cash Book
14.4.1 Simple Cash Book
14.4.2 Two Column Cash Book
14.4.3 Three Column Cash Book
14.5 Petty Cash Book.
14.5.1. Imprest System of Petty Cash Book.
14.5.2 Advantages of Petty Cash Book
14.6 Pass Book
14.7. Bank Reconciliation Statement
14.7.1 Meaning
14.7.2. Causes for difference between Cash Book Balance and Pass
Book Balance.
14.7.3. Need and importance of Bank Reconciliation Statement
14.7.4 Procedure for preparation of Bank Reconciliation Statement.
14.8. Summary
14.9. Glossary
14.10. Self Assessment Questions
14.11. Answer to check your progress
14.12. Further Readings
14.1. INTRODUCTION
Every entrepreneur should have knowledge of cash book and pass book as
from these books, he may check how much balance is available to him for
meeting his expenses and liabilities and what are the details of receipts and
payments of a particular period. With the details of payments it can be
checked that whether the payments are of reasonable amount or not. If the
expanses are unreasonably high he may take steps to control them. An
211
entrepreneur who regularly checks his cash and bank balances would never
face problems like dishonor of cheques or cash crisis etc. Entrepreneur, who
doesn’t distinguish between his revenue and profits, may spend all his receipts
for his personal purposes subsequently resulting in deficiency of cash for
business purposes and lead to cash crisis.
14.2. OBJECTIVES
After going through this lesson you should be able to
Explain the meaning of Cash Book, Pass Book, and Petty Cash Book.
Discuss the types of cash book.
Enter the transactions in Cash Book.
Explain the meaning, need and importance of bank reconciliation
statement.
Discuss the causes for difference between the balances of Pass Book
and Cash Book.
Prepare bank reconciliation statement.
14.3 CASH BOOK
In business most of the transactions relate to receipt of cash, payments of cash,
sale of goods and purchase of goods. So it is convenient to have separate
books for each such class of transaction, one for receipts and payments of
cash, one for purchase of goods and one for sale of goods. These books are
called subsidiary books.
Cash book is a subsidiary book which records the receipts and payment of
cash. With the help of cash book cash and bank balance can be checked at my
point of time.
(Ref.: T.S. Grewal, “Double Entry Book Keeping”)
14.4. TYPES OF CASH BOOK
Cash book can be of four types:
1. Simple Cash Book.
2. Two column cash book.
3. Three column cash book.
4. Petty cash book
14.4.1 SIMPLE CASH BOOK
A simple cash book is prepared like any ordinary account. The receipts are
recorded in the Dr Side and the payments are recorded in the Cr side of the
cash book. The specimen Performa of a simple cash book is given as follows:
Page 3
211
LESSON 14:
CASH BOOK, PASS BOOK, BANK
RECONCILIATION STATEMENT
Dr. Jyotsna Sethi, Rekha Rani
STRUCTURE
14.1 Introduction
14.2 Objectives
14.3 Cash Book
14.4 Types of Cash Book
14.4.1 Simple Cash Book
14.4.2 Two Column Cash Book
14.4.3 Three Column Cash Book
14.5 Petty Cash Book.
14.5.1. Imprest System of Petty Cash Book.
14.5.2 Advantages of Petty Cash Book
14.6 Pass Book
14.7. Bank Reconciliation Statement
14.7.1 Meaning
14.7.2. Causes for difference between Cash Book Balance and Pass
Book Balance.
14.7.3. Need and importance of Bank Reconciliation Statement
14.7.4 Procedure for preparation of Bank Reconciliation Statement.
14.8. Summary
14.9. Glossary
14.10. Self Assessment Questions
14.11. Answer to check your progress
14.12. Further Readings
14.1. INTRODUCTION
Every entrepreneur should have knowledge of cash book and pass book as
from these books, he may check how much balance is available to him for
meeting his expenses and liabilities and what are the details of receipts and
payments of a particular period. With the details of payments it can be
checked that whether the payments are of reasonable amount or not. If the
expanses are unreasonably high he may take steps to control them. An
211
entrepreneur who regularly checks his cash and bank balances would never
face problems like dishonor of cheques or cash crisis etc. Entrepreneur, who
doesn’t distinguish between his revenue and profits, may spend all his receipts
for his personal purposes subsequently resulting in deficiency of cash for
business purposes and lead to cash crisis.
14.2. OBJECTIVES
After going through this lesson you should be able to
Explain the meaning of Cash Book, Pass Book, and Petty Cash Book.
Discuss the types of cash book.
Enter the transactions in Cash Book.
Explain the meaning, need and importance of bank reconciliation
statement.
Discuss the causes for difference between the balances of Pass Book
and Cash Book.
Prepare bank reconciliation statement.
14.3 CASH BOOK
In business most of the transactions relate to receipt of cash, payments of cash,
sale of goods and purchase of goods. So it is convenient to have separate
books for each such class of transaction, one for receipts and payments of
cash, one for purchase of goods and one for sale of goods. These books are
called subsidiary books.
Cash book is a subsidiary book which records the receipts and payment of
cash. With the help of cash book cash and bank balance can be checked at my
point of time.
(Ref.: T.S. Grewal, “Double Entry Book Keeping”)
14.4. TYPES OF CASH BOOK
Cash book can be of four types:
1. Simple Cash Book.
2. Two column cash book.
3. Three column cash book.
4. Petty cash book
14.4.1 SIMPLE CASH BOOK
A simple cash book is prepared like any ordinary account. The receipts are
recorded in the Dr Side and the payments are recorded in the Cr side of the
cash book. The specimen Performa of a simple cash book is given as follows:
212
Simple Cash Book
Dr. Receipts Payments Cr.
Date Particulars Amt. Date Particulars Amt
Rs. Rs.
Balancing the Cash Book
The Cash book is balanced like any other account. The receipts column total
will be more than the payments column total. The difference will be written on
the Cr. Side as “By Bal c/d”.
Example 1
Enter the following transactions in a simple cash Book.
2006 Rs.
Jan 1 Cash in hand 12,000
Jan 5 Received from Ram 3,000
Jan 7 Paid Rent t 300
Jan 8 Sold goods 7000
Jan 10 Paid Shyam 2000
Simple Cash Book
Dr. Receipts Payments Cr.
Date Particulars Amt. Date Particulars Amt
2006 Rs. 2006 Rs.
12,000
3,000
7,000
300
2,000
17,000
Jan 1
Jan 5
Jan 8
To Bal b/d
To Ram
To Sales
22,000
Jan 7
Jan 10
Jan 31
By Rent
By Shyam
By Bal C/d
22,000
Check your progress
Activity I
Find out the monthly expenses and incomes of your family and prepare a cash
book for a particular month.
…………………………………………………………………………………
…………………………………………………………………………………
Page 4
211
LESSON 14:
CASH BOOK, PASS BOOK, BANK
RECONCILIATION STATEMENT
Dr. Jyotsna Sethi, Rekha Rani
STRUCTURE
14.1 Introduction
14.2 Objectives
14.3 Cash Book
14.4 Types of Cash Book
14.4.1 Simple Cash Book
14.4.2 Two Column Cash Book
14.4.3 Three Column Cash Book
14.5 Petty Cash Book.
14.5.1. Imprest System of Petty Cash Book.
14.5.2 Advantages of Petty Cash Book
14.6 Pass Book
14.7. Bank Reconciliation Statement
14.7.1 Meaning
14.7.2. Causes for difference between Cash Book Balance and Pass
Book Balance.
14.7.3. Need and importance of Bank Reconciliation Statement
14.7.4 Procedure for preparation of Bank Reconciliation Statement.
14.8. Summary
14.9. Glossary
14.10. Self Assessment Questions
14.11. Answer to check your progress
14.12. Further Readings
14.1. INTRODUCTION
Every entrepreneur should have knowledge of cash book and pass book as
from these books, he may check how much balance is available to him for
meeting his expenses and liabilities and what are the details of receipts and
payments of a particular period. With the details of payments it can be
checked that whether the payments are of reasonable amount or not. If the
expanses are unreasonably high he may take steps to control them. An
211
entrepreneur who regularly checks his cash and bank balances would never
face problems like dishonor of cheques or cash crisis etc. Entrepreneur, who
doesn’t distinguish between his revenue and profits, may spend all his receipts
for his personal purposes subsequently resulting in deficiency of cash for
business purposes and lead to cash crisis.
14.2. OBJECTIVES
After going through this lesson you should be able to
Explain the meaning of Cash Book, Pass Book, and Petty Cash Book.
Discuss the types of cash book.
Enter the transactions in Cash Book.
Explain the meaning, need and importance of bank reconciliation
statement.
Discuss the causes for difference between the balances of Pass Book
and Cash Book.
Prepare bank reconciliation statement.
14.3 CASH BOOK
In business most of the transactions relate to receipt of cash, payments of cash,
sale of goods and purchase of goods. So it is convenient to have separate
books for each such class of transaction, one for receipts and payments of
cash, one for purchase of goods and one for sale of goods. These books are
called subsidiary books.
Cash book is a subsidiary book which records the receipts and payment of
cash. With the help of cash book cash and bank balance can be checked at my
point of time.
(Ref.: T.S. Grewal, “Double Entry Book Keeping”)
14.4. TYPES OF CASH BOOK
Cash book can be of four types:
1. Simple Cash Book.
2. Two column cash book.
3. Three column cash book.
4. Petty cash book
14.4.1 SIMPLE CASH BOOK
A simple cash book is prepared like any ordinary account. The receipts are
recorded in the Dr Side and the payments are recorded in the Cr side of the
cash book. The specimen Performa of a simple cash book is given as follows:
212
Simple Cash Book
Dr. Receipts Payments Cr.
Date Particulars Amt. Date Particulars Amt
Rs. Rs.
Balancing the Cash Book
The Cash book is balanced like any other account. The receipts column total
will be more than the payments column total. The difference will be written on
the Cr. Side as “By Bal c/d”.
Example 1
Enter the following transactions in a simple cash Book.
2006 Rs.
Jan 1 Cash in hand 12,000
Jan 5 Received from Ram 3,000
Jan 7 Paid Rent t 300
Jan 8 Sold goods 7000
Jan 10 Paid Shyam 2000
Simple Cash Book
Dr. Receipts Payments Cr.
Date Particulars Amt. Date Particulars Amt
2006 Rs. 2006 Rs.
12,000
3,000
7,000
300
2,000
17,000
Jan 1
Jan 5
Jan 8
To Bal b/d
To Ram
To Sales
22,000
Jan 7
Jan 10
Jan 31
By Rent
By Shyam
By Bal C/d
22,000
Check your progress
Activity I
Find out the monthly expenses and incomes of your family and prepare a cash
book for a particular month.
…………………………………………………………………………………
…………………………………………………………………………………
213
…………………………………………………………………………………
…………………………………………………………………………………
…………………………………………………………………………………
Q 1. Enter the following transactions in the simple cash book.
2005 Rs.
Dec 1. Cash in Hand 10,000
Dec 2 Received from Ramesh 13,000
Dec 3 Purchased Furniture 15,000
Dec 4 Machinery Sold 10,000
Dec 5 Goods sold 20,000
Dec 6 Salaries paid 1,000
…………………………………………………………………………………
…………………………………………………………………………………
…………………………………………………………………………………
…………………………………………………………………………………
…………………………………………………………………………………
14.4.2. TWO COLUMN CASH BOOK
A two – column cash back records discount allowed and discount received
along with the cash payments and cash receipts.
Discount allowed is the concession given by the businessman to its customers
or debtors e.g. if a debtor has to pay Rs. 10,000 and he is allowed 10%
discount, now he will pay only Rs. 9000 to the firm. This is called discount
allowed, it is a type of loss for the business so it is to be debited and recorded
in Dr. Side of the cash book. Discount received is the concession received by
the business man from the creditors. e.g. if a firm has to pay Rs. 50,000 to its
creditors and discount received is 20% then the firm has to pay only Rs.
40,000 to the creditor. This is called discount received, it is a gain or profit
for the firm so it is to be credited and recorded in the Cr. side of the cash
book the specimen Performa of a two column cash Book is given as under –
Two column Cash Book
Dr Receipts Payments Cr
Date Particulars Amount
Dis.
Amount
Cash
Date Particular Amt.
Dis.
Amt.
Cash
Page 5
211
LESSON 14:
CASH BOOK, PASS BOOK, BANK
RECONCILIATION STATEMENT
Dr. Jyotsna Sethi, Rekha Rani
STRUCTURE
14.1 Introduction
14.2 Objectives
14.3 Cash Book
14.4 Types of Cash Book
14.4.1 Simple Cash Book
14.4.2 Two Column Cash Book
14.4.3 Three Column Cash Book
14.5 Petty Cash Book.
14.5.1. Imprest System of Petty Cash Book.
14.5.2 Advantages of Petty Cash Book
14.6 Pass Book
14.7. Bank Reconciliation Statement
14.7.1 Meaning
14.7.2. Causes for difference between Cash Book Balance and Pass
Book Balance.
14.7.3. Need and importance of Bank Reconciliation Statement
14.7.4 Procedure for preparation of Bank Reconciliation Statement.
14.8. Summary
14.9. Glossary
14.10. Self Assessment Questions
14.11. Answer to check your progress
14.12. Further Readings
14.1. INTRODUCTION
Every entrepreneur should have knowledge of cash book and pass book as
from these books, he may check how much balance is available to him for
meeting his expenses and liabilities and what are the details of receipts and
payments of a particular period. With the details of payments it can be
checked that whether the payments are of reasonable amount or not. If the
expanses are unreasonably high he may take steps to control them. An
211
entrepreneur who regularly checks his cash and bank balances would never
face problems like dishonor of cheques or cash crisis etc. Entrepreneur, who
doesn’t distinguish between his revenue and profits, may spend all his receipts
for his personal purposes subsequently resulting in deficiency of cash for
business purposes and lead to cash crisis.
14.2. OBJECTIVES
After going through this lesson you should be able to
Explain the meaning of Cash Book, Pass Book, and Petty Cash Book.
Discuss the types of cash book.
Enter the transactions in Cash Book.
Explain the meaning, need and importance of bank reconciliation
statement.
Discuss the causes for difference between the balances of Pass Book
and Cash Book.
Prepare bank reconciliation statement.
14.3 CASH BOOK
In business most of the transactions relate to receipt of cash, payments of cash,
sale of goods and purchase of goods. So it is convenient to have separate
books for each such class of transaction, one for receipts and payments of
cash, one for purchase of goods and one for sale of goods. These books are
called subsidiary books.
Cash book is a subsidiary book which records the receipts and payment of
cash. With the help of cash book cash and bank balance can be checked at my
point of time.
(Ref.: T.S. Grewal, “Double Entry Book Keeping”)
14.4. TYPES OF CASH BOOK
Cash book can be of four types:
1. Simple Cash Book.
2. Two column cash book.
3. Three column cash book.
4. Petty cash book
14.4.1 SIMPLE CASH BOOK
A simple cash book is prepared like any ordinary account. The receipts are
recorded in the Dr Side and the payments are recorded in the Cr side of the
cash book. The specimen Performa of a simple cash book is given as follows:
212
Simple Cash Book
Dr. Receipts Payments Cr.
Date Particulars Amt. Date Particulars Amt
Rs. Rs.
Balancing the Cash Book
The Cash book is balanced like any other account. The receipts column total
will be more than the payments column total. The difference will be written on
the Cr. Side as “By Bal c/d”.
Example 1
Enter the following transactions in a simple cash Book.
2006 Rs.
Jan 1 Cash in hand 12,000
Jan 5 Received from Ram 3,000
Jan 7 Paid Rent t 300
Jan 8 Sold goods 7000
Jan 10 Paid Shyam 2000
Simple Cash Book
Dr. Receipts Payments Cr.
Date Particulars Amt. Date Particulars Amt
2006 Rs. 2006 Rs.
12,000
3,000
7,000
300
2,000
17,000
Jan 1
Jan 5
Jan 8
To Bal b/d
To Ram
To Sales
22,000
Jan 7
Jan 10
Jan 31
By Rent
By Shyam
By Bal C/d
22,000
Check your progress
Activity I
Find out the monthly expenses and incomes of your family and prepare a cash
book for a particular month.
…………………………………………………………………………………
…………………………………………………………………………………
213
…………………………………………………………………………………
…………………………………………………………………………………
…………………………………………………………………………………
Q 1. Enter the following transactions in the simple cash book.
2005 Rs.
Dec 1. Cash in Hand 10,000
Dec 2 Received from Ramesh 13,000
Dec 3 Purchased Furniture 15,000
Dec 4 Machinery Sold 10,000
Dec 5 Goods sold 20,000
Dec 6 Salaries paid 1,000
…………………………………………………………………………………
…………………………………………………………………………………
…………………………………………………………………………………
…………………………………………………………………………………
…………………………………………………………………………………
14.4.2. TWO COLUMN CASH BOOK
A two – column cash back records discount allowed and discount received
along with the cash payments and cash receipts.
Discount allowed is the concession given by the businessman to its customers
or debtors e.g. if a debtor has to pay Rs. 10,000 and he is allowed 10%
discount, now he will pay only Rs. 9000 to the firm. This is called discount
allowed, it is a type of loss for the business so it is to be debited and recorded
in Dr. Side of the cash book. Discount received is the concession received by
the business man from the creditors. e.g. if a firm has to pay Rs. 50,000 to its
creditors and discount received is 20% then the firm has to pay only Rs.
40,000 to the creditor. This is called discount received, it is a gain or profit
for the firm so it is to be credited and recorded in the Cr. side of the cash
book the specimen Performa of a two column cash Book is given as under –
Two column Cash Book
Dr Receipts Payments Cr
Date Particulars Amount
Dis.
Amount
Cash
Date Particular Amt.
Dis.
Amt.
Cash
214
Note:
Discount columns are not balanced they are merely totaled.
Example 2:
Enter the following transactions in a two column ash Book.
2005 Rs.
Jan 1 Cash in hand 15,000
Jan 5 Paid to Ram 3,000
Jan 5 Discount allowed by him 100
Jan 6 Purchased goods 4,000
Jan 10 Received from R. Gupta 9,800
Jan 10 Discount allowed 200
Jan 11 Sold goods 4,000
Jan 12 Paid to S. Sharma 2,950
Discount received Rs. 50 50
Jan 13 Paid wages 500
Jan 14 Paid to Naresh in full settlement of his
Account which shows a Cr. Balance of
Rs. 4000 3900
Two Column Cash Book
Dr Receipts Payments Cr
Date
2005
Particulars Amt
Dis.
Rs
Amt
Cash
Rs
Date
2005
Particulars Amt
Dis.
Amt
Cash
Jan 1
Jan 10
Jan 11
To Bal b/d
To R. Gupta
To sales
-
200
-
15,000
9,800
4,000
Jan 5
Jan 6
Jan 12
Jan 13
Jan 14
Jan 31
By Ram
Purchases
By S. Sharma
By Wages
By Naresh
By Bal c/d
100
-
50
100
3,000
4,000
2,950
500
3,900
14,450
200 28,800 250 28,800
Check your progress
Q 2. X started business on 1.4.2005 with Rs. 20,000 as Capital. He had
following cash transactions in the month of April 2005.
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