Cash book with Bank Column

Sir, how do we record these transactions in the cash book? Request u to explain the transaction on April 8th??
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asked Jan 9, 2016 in Subsidiary Books by Feba Rajeev (71 points) 338 views

1 Answer

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On 5th April a cheque of Rs.2000 is received from Mohan but is not deposited in the bank, hence it is taken in the cash column.  On April 8, this cheque is endorsed in favour of Sohan, hence entry for payment is made in the cash column.  Another alternative could be that you don't take this transaction in cash book and pass the following journal entry in the General Journal.  But first choice of recording the transaction in the cash book is better.

Sohan A/c     Dr.  2000

  To Mohan A/c               2000

answered Jan 9, 2016 by jbsclasses (3,853 points)
Why is Rs2000 written in the cash column and not the bank column? And if you do not pass the entry in the cash book won't the answer be different??
As the cheque has not been deposited in Bank, that is why it is not taken in bank column.  Since this cheque has been endorsed, it has been treated like cash, hence taken in cash column.

     I will give you another example of taking a cheque in the cash column.  When a cheque is received and is not deposited the same day in the bank, it is taken in the cash column.  Whenever that cheque is deposited in the bank, on that day a contra entry is passed.  That means on that day Bank A/c is debited and Cash A/c is credited.

    You will observe that on one day cash a/c has been debited on 15/4 with Rs.2000 and credited with Rs.2000 on 18/4.  So the impact of these two transactions is nil on the cash balance with us.  Yes, temporarily between 15/4 and 17/4 there was an excess cash of Rs.2000 as per cash book which was actually represented by the cheque of Mohan.

     As stated above in my reply this transaction can also be recorded in journal.