Page 12 - NOTES- CASH BOOK

106 Accountancy

The bank column is balanced in the same way as the cash column. However,
in the bank column, there can be credit balance also because of overdraft taken
from the bank. Overdraft is a situation when cash withdrawn from the bank
exceeds the amount of deposit. Entries in respect of cheques received should be
made in the bank column of the cash book. When a cheque is received, it may be
deposited into the bank on the same day or it may be deposited on another day.
In case, it is deposited on the same day the amount is recorded in the bank
column of the cash book on the receipts side. If the cheque is deposited on
another day, in that case, on the date of receipt it is treated as cash received and
hence recorded in the cash column on the receipts side. On the day of deposit to
the bank, it is shown in the Bank Column on receipt (Dr.) side and in the Cash
Column on the payment (Cr.) side. This is a contra entry.
If a cheque received from a customer is dishonoured, the bank will return
the dishonoured cheque and debit the firm’s account. On receipt of such
cheque or intimation from the bank, the firm will make an entry on the credit
side of the cash book by entering the amount of the dishonoured cheque in
the bank column and the name of the customer in the particulars column.
This entry will restore the position prevailing before the receipt of the cheque
form the customer and its deposit in the bank. Dishonour of a cheque means
return of the cheque unpaid, generally due to insufficient funds in the
customer’s account with the bank.
If the bank debits the firm on account of interest, commission or other
charges for bank services, the entry will be made on the credit side in bank
column. If the bank credits the firm’s account, the entry will be made on the
debit side of the cash book in the appropriate column. The format of double
column cash book is shown in figure 4.5.

Cash Book
Dr Cr
Date Receipts L.F. Cash Bank Date Payments L.F. Cash Bank
Rs. Rs. Rs. Rs.

Fig. 4.5 : Format of a double column cashbook

2018-19