Form 11. Cash Book (right-hand page)
(Cash Disbursements Journal)
Form of the Cash Journals.—In the cash journals, just as in all other journals, provision is made for date, account classification, explanation, ledger posting index, and money columns. In a simple form of cash book, just as in the purchase and sales journals, two money columns are usually provided, the one for detail—a day’s or week’s detail—and the other for totals. Such a form is shown in Forms 10 and 11. The student should note carefully how the cash receipts journal is summarized. The balance of cash brought forward from the previous week is entered in the second or total column so that the detail column shows only the current week’s receipts. Inasmuch as the Cash account in the ledger already shows the balance of cash at the beginning of the week, i.e., $5,000, this amount must not be included in the summary entry for the current week. In summarizing the cash receipts journal, therefore, the total only of the detail column, showing the cash received since the last summary, is set up as a “Cash, Dr.” item. In summarizing the cash disbursements journal, since there is normally no balance carried over from the previous week, the total of the journal—representing the cash disbursed since the last summary—is set up as a “Cash, Cr.” item. This is shown as $365, the amount being posted to the credit of the ledger Cash account on page 1.
Cash Book Taking the Place of the Cash Account.—Because the two cash journals are set up on facing pages, the record contains essentially the same information as a detailed Cash account in the ledger. The double page record brings together both the receipts and the deductions from receipts—cash being normally a debit account. For this reason the cash book record is itself sometimes used as a ledger account and when it is so used its totals are not posted to the ledger account. The balance of the cash book must, however, be included in the trial balance of the ledger, because when so used the cash book is not only a journal but a ledger account as well.
When, however, the totals of both cash receipts and disbursements are posted to a Cash account in the ledger, the balance used in the trial balance is taken from the ledger account and not from the cash book, although of course the balances in both are the same.
Whichever of these two methods is used, it must always be remembered that the cash book is essentially a journal and that therefore its classifications of business transactions must be transferred to their proper accounts in the ledger.
Best accounting practice, however, requires that a Cash account be carried in the ledger so that the ledger will be a complete record of all transactions and will be independent of all other records for proof of its equilibrium.
Posting the Cash Book.—In posting the debit side of the cash book to the ledger, it is important to remember that the debit element of the transaction is merely indicated by the fact that the entry appears on the left-hand page of the cash book. The account name written in the Account Classification column is the credit element and must be posted to the credit of the corresponding account in the ledger. Similarly, on the right-hand side of the cash book, the cash credit element of the entry is suppressed and the named account should be posted to the debit of the corresponding ledger account.
After the posting of the individual items has been completed, the “Cash, Dr.” and the “Cash, Cr.” as shown by the summary entries must be posted to the ledger Cash account, as explained on [page 143].
As stated above, each side of the cash book is, in reality, a journal in itself—a cash receipts journal and a cash disbursements journal—and it is only because these two journals are shown side by side that the cash book is sometimes made to serve the purpose of a ledger Cash account.