Short Notes — Ch 9 Cash Book
⚡ Ch 9 — Cash Book
[!abstract] Exam weight PYQ: supports 2022·Q104 (dishonoured cheque) — no standalone question yet. MCQ bank: 25 questions (Q98–117 · Q345–349) — a big MCQ block. Tier D for the paper, but it is the gateway to Ch 15 (BRS), which is heavily asked. Learn it for that reason.
1️⃣ The core
Cash Book = a special journal recording all cash and bank receipts & payments.
[!important] ⭐ The dual-role fact — asked repeatedly The Cash Book is BOTH a subsidiary book AND a principal book.
- Journal, because transactions are recorded here first, from source documents
- Ledger, because it is the Cash Account — so no separate Cash A/c is opened in the ledger
Receipts → DEBIT (left) · Payments → CREDIT (right)
⭐ A cash book can never show a credit balance (you cannot pay out more cash than you hold). A bank column, however, can go credit — that is an overdraft.
2️⃣ ⭐ The 4 kinds of Cash Book
| Type | Columns on each side | Records |
|---|---|---|
| Single (Simple) Column | Cash | cash only |
| Double (Two) Column | Cash + Discount | cash + discount allowed/received |
| ⭐ Triple (Three) Column | Cash + Bank + Discount | cash, bank and discount — the one with contra entries |
| Petty Cash Book | — | small/petty payments (postage, stationery, conveyance) |
Discount rule: discount allowed (to customers) → debit side · discount received (from suppliers) → credit side.
3️⃣ ⭐ CONTRA ENTRY — the most-asked idea
A contra entry affects both cash and bank, so both sides of the same cash book are hit. Marked with "C" in the L.F. column and needs no further posting.
| Transaction | Contra? |
|---|---|
| Cash withdrawn from bank for OFFICE use | ✅ Yes |
| Cash deposited into bank | ✅ Yes |
| Cheque received and deposited same day | ✅ Yes (treated as cash → bank) |
| Cash withdrawn from bank for PERSONAL / domestic use | ❌ No — that is DRAWINGS |
⚠️ The trap: "withdrew cash from bank for personal use" is NOT a contra entry. Only office use is. Contra entries appear only in a Triple (three) column cash book — a single-column book has no bank column.
4️⃣ Quick Revision Table
| Point | Answer |
|---|---|
| Entry on both sides of the cash book | Contra entry |
| Kinds of cash book | 4 |
| Cash book records | both receipts and payments |
| Cash book is a | subsidiary + principal book (dual role) |
| It also serves as | the Cash Account (so no Cash A/c in the ledger) |
| Cash column can show | debit balance only |
| Bank column credit balance means | Bank overdraft |
| Favourable balance | debit balance in the cash book |
| Unfavourable balance (overdraft) | a liability |
| Balance in the petty cash book | an ASSET |
| Petty cash pays for | postage, stationery, conveyance — not salaries |
| Cheque received 12 Dec, dated 25 Dec | treated as cash (post-dated — not yet bank) |
| Not a cash/cash equivalent | bank borrowings |
| Depreciation / dividend declared | ❌ do NOT touch the cash book (non-cash) |
5️⃣ 🎯 PYQ link
2022 · Q104 — Cheque received from a customer, deposited for collection, later dishonoured
a) customer's account credited b) customer's account debited c) no change in customer a/c d) no change in bank a/c → Ans: B The original receipt is reversed — the customer owes again, so debit the customer. (MCQ Q116 asks the same thing.)
6️⃣ High-frequency MCQ traps
| MCQ | Point |
|---|---|
| Q98 | Entry on both sides = contra entry |
| Q99 | Depreciation and declared dividends do NOT affect the cash book |
| Q100 | There are 4 kinds of cash book |
| Q102 | Cheque received and banked same day → bank column |
| Q103 / Q115 / Q345 | Contra = office use, not personal use |
| Q105 | Post-dated cheque → treated as cash |
| Q107 | Bank borrowing is not a cash equivalent |
| Q109 | Contra entries only in the three-column cash book |
| Q110 | Cash + bank together = triple column cash book |
| Q112 | Unfavourable (overdraft) balance = a liability |
| Q116 | Dishonoured cheque → reverse the entry |
| Q117 | Favourable = debit balance in the cash book |
| Q347 | Petty cash book balance = an ASSET |
| Q348 / Q349 | Petty cash = postage & conveyance, not manager's salary |
7️⃣ If you remember nothing else
Cash Book = subsidiary + principal book, and IS the Cash A/c · Receipts = debit, Payments = credit · Cash column can never be credit; bank column credit = OVERDRAFT · Contra = cash↔bank for OFFICE use only (personal = drawings) · Contra only in 3-column · Petty cash balance = asset · Favourable = debit balance
[!tip] Why this chapter matters more than its marks suggest Debit balance in the cash book = credit balance in the pass book, and overdraft = unfavourable — these two facts carry straight into Ch 15 — Bank Reconciliation (L-15-BANK RECONCILIATION STATEMENT), which is worth 6 marks. Learn Ch 9 as the on-ramp to Ch 15.
🔗 Related
- Full notes: L-9-CASH BOOK · MCQs Q98–117, Q345–349 in MCQs
- Prev: SN-8-Subsidiary-Books · Next: Ch 10 — Trial Balance (pending your go-ahead)
