Accountancy · Ch 4 — Recording of Transactions - II
Balancing of Cash Book
Balancing of Cash Book
Balancing of Cash Book
The cash book is balanced in exactly the same way as any ledger account. On the left-hand side (debit side), all cash receipts are recorded date-wise. On the right-hand side (credit side), all cash payments are recorded date-wise. When a cash book is maintained, a separate cash account in the ledger is not opened — the cash book itself serves as the cash account.
The Debit Balance Rule
There is one critical difference between the cash book and most other ledger accounts: the cash book will always have a debit balance. This is because cash payments can never exceed the total of cash receipts plus the opening cash in hand. You cannot pay more cash than you have. Therefore, the debit side total will always be greater than or equal to the credit side total.
The cash book always shows a debit balance (or zero, but never a credit balance). A credit balance in the cash book is impossible in normal circumstances — it would mean you paid cash you did not have.
Source Documents for the Cash Book
For every entry in the cash book, there must be a supporting document:
- For cash receipts: The source document is generally the duplicate copy of the receipt issued by the cashier to the person making the payment.
- For cash payments: Any document on the basis of which payment has been made serves as the source document — an invoice, a bill, a receipt, a pay slip, etc.
All these documents are collectively called vouchers. After payment is made, vouchers are given a serial number and filed separately for future reference and verification.
Procedure for Balancing
The steps are identical to balancing any ledger account:
- Total the debit side (receipts column).
- Total the credit side (payments column).
- Find the difference: Debit total − Credit total.
- Enter the difference on the credit side as "Balance c/d" (carried down) with the date.
- Total both sides — they must now match.
- Bring down the balance to the debit side of the next period as "Balance b/d" (brought down).
The textbook's four worked cash-book Illustrations (single column, double column, bank column with overdraft, and the comprehensive Advance Technology cash book) now live in this chapter's Illustrations & practice tab, alongside their full solutions.
Summary of Rules for Balancing the Cash Book
- Always a debit balance: The cash book can never have a credit balance because you cannot spend more cash than you have.
- Contra entries: When cash is deposited into the bank or withdrawn from the bank, both the cash column and bank column are affected. These are marked with "C" in the L.F. column and are not posted to any ledger account separately. …