Cash Book

CASH BOOK

Cash book is the only book of original entry which is given ruling in such a way that it could act at the same time as a book of original entry and as a ledger account.

1. Trade Discount: It is an allowance or deduction given by the supplier to the retailer on the catalogue price or list price.
i. It is given to encourage him to buy in bulk.
ii. It is given so that retailer could make some profit.
Note: It is not recorded in the books either by the seller or the buyer.

2. Cash Discount: It is an allowance or deduction given by the receiver of cash to the payer of cash for prompt payment.
It is of two types discount allowed and discount received.

i. It is given to encourage the payer to pay on or before the due date.

ii. Note: This discount is recorded in the Cash Book. Discount allowed is recorded at the debit side and discount received on the credit side.

iii. Note: Discount columns are never balanced. It is just totalled.

iv. Note: Every month the Total’s of discount allowed column is transferred to debit side of Discount allowed account in General ledger and the total of discount-received column is transferred to the credit side of Discount received account in the General ledger.

2. Contra Entry: When a transaction effects both cash and bank accounts at the same time, such entries are called as Contra Entries.