1st entry bank a/c dr to navin. and 2nd entry first me nhi 2nd me hogi
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Balancing of Cash Book

The cash book is a subsidiary book that records all cash and bank transactions of a business. It serves as a record of all cash receipts and payments made by the company. Balancing the cash book is an essential step in the accounting process to ensure accuracy and completeness of financial records. Let's understand the process of balancing the cash book in detail.

1. Definition and Purpose:
The cash book is a ledger that records all cash and bank transactions. It helps in maintaining an accurate record of cash inflows and outflows, thereby enabling the reconciliation of bank statements. Balancing the cash book involves comparing the total cash receipts and payments to determine the closing balance.

2. Recording Cash Receipts:
Cash receipts include any money received by the business. It can be from sales, loans, investments, or any other source. The cash book records these receipts in the "Receipts" or "Cash In" column, along with the relevant details such as the date, description, and amount.

3. Recording Cash Payments:
Cash payments include any money paid by the business. It can be for expenses, purchases, loans, or any other purpose. The cash book records these payments in the "Payments" or "Cash Out" column, along with the relevant details such as the date, description, and amount.

4. Bank Transactions:
Bank transactions, such as deposits and withdrawals, are also recorded in the cash book. When a cheque is received, it is recorded as a cash receipt, and when a cheque is issued, it is recorded as a cash payment.

5. Balancing the Cash Book:
To balance the cash book, the total of the cash receipts column is added up, and the total of the cash payments column is added up separately. These totals are then compared to determine the closing balance.

6. Calculating Closing Balance:
To calculate the closing balance, the total of the cash payments is subtracted from the total of the cash receipts. The resulting amount is added to the previous balance, if any, to obtain the closing balance.

7. Bank Reconciliation:
After balancing the cash book, a bank reconciliation is performed to ensure that the cash book matches the bank statement. Any discrepancies between the two are identified and resolved. This process helps in detecting errors, omissions, and fraudulent activities.

8. Bank Charges:
In the given scenario, Mavin's cheque was dishonored, and the bank charged a fee of Rs. 5. This charge should be recorded in the cash book as a cash payment, along with the relevant details.

In conclusion, balancing the cash book is a crucial step in maintaining accurate financial records. It involves recording cash receipts and payments, calculating the closing balance, and reconciling it with the bank statement. This process ensures the accuracy and completeness of cash transactions and helps in detecting any discrepancies.