Difference Between Cash Book and Cash Account

A cash book and cash account slightly vary from one another in the sense that a cash book is a specifically maintained ledger (subsidiary book) for recording cash transactions whereas a cash account is an account within the ledger. A Cash Book records cash transactions directly whereas a Cash Account is a part of a ledger in which entries are posted from the Journal.

Below we have discussed these two terms in detail along with their features:

Cash Book

The cash book is a kind of subsidiary book in which all business transactions relating to cash receipts and cash payments are recorded. When a transaction involving cash takes place, the first book where the inflow or outflow of cash resulting from such transaction gets recorded is the cash book. All cash receipts are to be recorded on the debit side and all cash payments are to be recorded on the credit side.

But you should know that an essential characteristic of a cash book is that although it is a book of Original Entry, it serves the purpose of both Journal as well as Ledger. It is in the form of an account and hence, serves the purpose of a Cash Account too. So, if you are separately maintaining a cash book, you don’t need to maintain another Cash Account. The cash book would serve the purpose of a Cash Account. Hence, to account for cash transactions, only a single aspect of transactions shall be recorded in the ledger because the other aspect is to be recorded in Cash Book. For example, payment of salaries to staff will be debited to the ledger (Salary A/c) with a simultaneous credit in Cash Book.

The features of a cash book are as follows:

  • In the cash book, only cash transactions are documented in chronological order.
  • It can serve as both a journal and a ledger at the same time.
  • The debit side records all cash receipts, while the credit side records all cash payments.
  • It just keeps track of one aspect of the transaction, which is the cash.
  • Details or narration of transactions is provided in the cash book.
  • A column for Ledger Folio is given.

Cash Account

A cash account, on the other hand, is in the nature of a “real account”. And the fundamental accounting rule for real accounts says that debit what comes in and credit what goes out. Thus, when cash comes into a business, Cash Account is debited and when cash goes out, the account is credited.

In general, Cash Account is used when an entity does not separately maintain a cash book (subsidiary book) and all transactions are first clubbed together in the Journal. From there it is pertinent to segregate cash transactions from the rest, post them from the Journal and have a dedicated account for them. This dedicated ledger account is the Cash Account.

But as stated previously, if a cash book is maintained, you won’t need to have a Cash Account separately as it will post balances directly to the Trial Balance.

The features of a Cash Account are as follows:

  • A cash account serves the purpose of a ledger.
  • Details or narration of transactions is not shown in the cash account.
  • If a Cash A/c is opened in the Ledger, all the cash transactions are first recorded in the Journal. Hence, posting is made from Journal to this account.
  • A column for Journal Folio is given. It signifies the page number of the Journal from where the transaction is posted in the cash account.
  • The debit side records all cash receipts, while the credit side records all cash payments.

Specimen of Cash Account

Cash account

*J.F. represents Journal Folio.

Specimen of Cash Book

A cash book may be prepared with a single column, double column (for cash and discount), or triple column (for cash, bank entries, and discount).

Below is a specimen for a three-column cash book:

Cash book

*L.F. represents Ledger Folio.

The cash column is used to track cash transactions and payments, whereas the discount column is used to track discounts received and allowed. On the debit side, the discount column reflects the allowable discount, whereas, on the credit side, the discount column shows the discount received.

In addition, when a triple column cash book is used, there is no need to have a separate bank account in the ledger. But it may be noted that discount columns do not perform the role of a discount account. Discount columns are simply memorandum columns. The ledger is opened with a discount allowed account and a discount received account, and the totals of the discount columns are posted to these accounts.

Differences

From the above features and discussion, the key differences between cash book and cash account are shown in the table below:

BasisCash BookCash Account
MeaningA cash book is a subsidiary book that records cash transactionsA cash account is a ledger account that sorts and balances cash transactions
Nature of transactionsContains cash transactions and also bank transactionsContains only cash transactions
Original entryRecords cash transactions directly (need not be primarily recorded in Journal)Entries are posted here from the Journal
DiscountMay have a column for discountDoes not record discount
Serves asServes as both Journal and LedgerServes as Ledger
ContraContra entries are done for withdrawal of cash from the bank or deposit of cash to the bankNo contra entries
Posting to Trial BalanceCash and Bank balances are posted in the Trial balance directly, but discount balances are posted to the ledgerCash balances are posted in the Trial balance directly
FolioUses Ledger Folio (L.F.)Uses Journal Folio (J.F.)
NarrationYesNo
Balance reconciliationDailyMonthly

Conclusion

The Cash Book is essentially a ledger account, but because of the enormous number of entries made in it, it is maintained in a distinct book called a Cash Book, which is also used as a book of prime entry. There are a variety of reasons why a business might prefer to record transactions in a cash book rather than a cash account. With a cash book, daily cash balances are simple to obtain and calculate. Mistakes are easily detected through verification, and entries are kept up to date because the balance is confirmed daily. In fact, a Cash Book is an excellent replacement for a Cash Account. Balances are normally reconciled for cash accounts at the end of the month after the monthly bank statement is issued.


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Ruchi Gandhi

The author enjoys to write informational content in the domain of company law and allied laws. She takes interest in doing thorough and analytical research on legal topics. She is a CA along with MBA (Fin) and M. Com.

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