The Cash Book.—For recording transactions involving cash, two journals are used. One of these records receipts and the other disbursements of cash. They are known respectively as the “Cash Receipts Journal” and the “Cash Disbursements Journal.” Instead of being separate books, however, they are usually bound together and comprise what is called the “Cash Book.” When bound together their pages alternate throughout the book. The cash receipts journal occupies the left-hand pages, i.e., the even numbered pages—2, 4, 6, etc.—and the cash disbursements journal the right-hand pages—3, 5, 7, etc.— page 1 not being used. This method sets up the cash record, receipts and disbursements, on facing pages and the movement of cash is thus under easy and constant review.
The Cash Receipts Journal—Analysis of a Cash Receipt.—If $100 cash is received on account from John Doe, a customer, an analysis of the transaction shows “Cash” debit and “John Doe” credit.
- Cash100.00
- John Doe100.00
So with all receipts of cash; the “cash” element is a debit. The record of cash receipts being made in a journal devoted exclusively to receipts of cash, the “Cash, Dr.” element of the entry may be omitted and only the “credit” element need be shown; the very fact that the entry is made in the cash receipts journal is sufficient to indicate that “Cash” is a debit. The cash receipts journal ([Form 10])—the left or debit side of the cash book—is operated, therefore very much like the purchase journal.
Form 10. Cash Book (left-hand page)
(Cash Receipts Journal)
The Cash Disbursements Journal—Analysis of a Cash Disbursement.—If $10 is paid for expenses of some kind, the analysis gives “Expense” debit and “Cash” credit.
- Expense10.00
- Cash10.00
So with all disbursements of cash. A separate journal being devoted exclusively to cash disbursements, the “Cash, Cr.” element of the entry may be omitted and only the debit shown. The cash disbursements journal is thus seen to be operated in the same way as the sales journal.
Thus, all left-hand pages in the cash book show receipts and all right-hand pages show disbursements. Because it is unnecessary to write the debit element of cash received and the credit element of cash paid out, a great saving of labor is effected. Nevertheless, it must be remembered that the entry on either side of the cash book is essentially a journal entry, and that the missing elements—cash debit on the left page and cash credit on the right page—are supplied at the end of the period by the totals when the two journals are summarized in preparation for posting to the Cash account in the ledger.