Two/Double Column Cash Book:

Definition and Explanation:

Cash A/c and Bank A/c are two busiest accounts in ledger and they are removed from the ledger to reduce its volume and size. Cash A/c is removed from the ledger and instead of it the Single Column Cash Book is kept to record cash transactions. In the same way no Bank A/c is opened in ledger for recording bank transactions, rather an additional amount column is provided on each side of 'Single Column Cash Book' for recording bank transactions. One more column for amount is provided on the debit side and one on credit side of Single Column Cash Book. These two amount columns on debit side and credit side will serve as Bank A/c and so it will not be necessary to open a Bank A/c in the ledger. The Cash Book having two Amount Columns on both sides is called 'Double Column Cash Book'.

Advantages:

The following advantages are derived from Double Column Cash Book:

1. All entries made in "Bank" Column of Double Column Cash Book form a part of double entry system and hence a separate Bank A/C need not be opened in ledger. It saves time, labour and cost.
2. Both cash transactions and bank transactions are recorded in the same book. So both cash balance and bank balance are easily available from the same book.

Thus it is said that the Double Column Cash Book has two accounts in it, the Cash A/C and the Bank A/C.

Contra Entry

In any account we can only have one half of a double entry. An account cannot be debited and credited at the same time. For example, when we sell goods for cash, cash received will be recorded on the debit side of Cash Book and the goods sold will be posted on the credit side of Sales Account. But in Double Column Cash Book, we have two accounts, Cash A/c and the Bank A/c, so it is possible to have both a debit entry and a credit entry at the same time. For example, cash of $5,000 is deposited into the bank. In this transaction both Bank A/c and Cash A/c are involved and they will be recorded on both sides of Double Column Cash Book i.e. on the debit side in bank column and on the credit side in cash column.

Thus a transaction in which Cash A/c and Bank A/c are involved, is recorded on both the sides of Double Column Cash Book, it is called "contra entry", from the Latin prefix contra meaning 'opposite to or against'.

In recording such a transaction the letter "C", is written in 'L.F' column because both aspects of the transactions are recorded and there is no need to post them into the ledger.

In this connection, the difference between contra entry and other entries in Cash Book may be noted. ''The Double entry work of contra entry is completed in Cash Book. They need not be posted to ledger". But the double entry work of other entries in Cash Book is not completed, one aspect (i.e. cash aspect) of the transaction is, however, completed in Cash Book, but the other aspect is not completed, which is to be posted to the concerned account in ledger.

Contra entry will be passed in the following cases:

When cash is deposited into the Bank:

Bank column - debit -- Cash column-credit.

When cash is drawn from the bank for business purposes:

Cash Column - debit -- Bank column - credit.

When a cheque received from a debtor on a date subsequent to its receipt is deposited into the bank:

Bank column - debit -- Cash column - credit.

More Hints:

While writing Double Column Cash Book, keep in mind that there are two separate boxes - one for the cash and other for the bank:

When cash or Cheques (Cheques received but not deposited on the same date ) enters into cash box, Cash Column is debited and when cash or cheque goes out of the cash box. Cash Column is credited. On the other hand, when Cash or cheque enters into bank box, Bank Column is debited and when cash goes out of bank box, bank column is credited.

Example 1:

Enter the following transactions in a double column cash book/two column cash book.

Solution:

Double Column Cash Book

Example 2:

Enter the following transactions of M. Rauf in a Double Column Cash Book and post them to concerned accounts in ledger:

Solution:

Cash Book (double column)

1. On 6.1.2005, cheque received from Babar is treated as cash because it is not deposited into the bank on the same date.
2. A contra entry is passed when Babar's cheque (which was treated as cash) is deposited into the bank on 8.1.2005.
3. On 15.1.2005, cheque received from S. Rashid is treated as cash, so recorded in Cash Column.
4. Cheque issued to Arshad Khan on 17.1.2005 is dishonored, so the bank is debited again and Arshad Khan became a creditor again.
5. On 21.1.2005, the bank allowed us interest which is revenue for the business and our bank balance is increased by $1,400.

Note:

The transaction on 18.1.2005 is not entered in the Cash Book because it does not involve cash A/c or Bank A/c. Simply S. Rashid will become debtor and Shakeel will become creditor again and entry will be passed in proper journal as:

18.1.05.

S. Rashid A/C ............. Dr.  10,000
     Shakeel A/C.............................. Cr.  10,000

Posting from Cash Book to concerned accounts In Ledger:

Rule For Posting:

• On credit side: of the concerned accounts in Particulars Column on the debit side of the Cash Book.
• On debit side: of the concerned accounts in Particulars Column on the credit side of the Cash Book.

Sales A/C (Folio 5)

Baber A/C (Folio 9)

S. Rashid A/C (Folio 15)

Interest A/C (Folio 19)

Arshad Khan A/C (Folio 17)

M. Arshad Khan A/C (Folio 7)

Drawings A/C (Folio 11)

Purchase A/C (Folio 10)

Shakeel A/C (Folio 16)

Bank Charges A/C (Folio 20)

Sales A/C (Folio 21)

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