Business

Difference between Cashbook and Cash Account

Difference between Cashbook and Cash Account

Money is an important thing in the modern world, and it can be a huge drive for a lot of people. When it comes to accounting, there are a lot of difficult terms that a person might not be familiar with, and that is where cash book and cash account come in. Both of them might seem similar, but they are completely different.

A cashbook refers to the document in which all cash receipts and cash payments are written down. This also includes withdrawals and deposits from the bank. To put it simply, it is the book where all of the original entry of a business gets recorded.

It is where all cash transactions are written or recorded. On the other side, a cash account is an account that is within a specific ledger. A cash book serves the purpose of both journal and a ledger, while a cash account is structured just like a ledger.

Cashbook Vs. Cash Account

The main difference between the cash book and the cash account would be the way things are recorded on them. A cash book is where everything is written down as it is the original copy, while the cash account is a ledger account where the posting is only made once it has already been written somewhere else. Thus, in terms of dependency, a cash account is highly dependent on the journal where it would get its entries from, whereas a cash book can easily stand on its own. Cash books also come with narration right after their entries, while cash accounts do not.

What is a Cash book?

In businesses, a transaction can go in two forms: through cash or credit. When recording these cash transactions, one instrument used would be a cash book. A cashbook is both a ledger and a journal for all of the transactions within a business or a company. It is the first point entry of all the cash transactions in and out of business and bank transactions. It has come with two sections which are the credit and the debit.

When cash is received, it is placed on the left or debit side. On the other side, when cash is given out, it is written on the right or credit side of the cash book. A cash book is important to see the balance of the cash you have on hand or the bank balance you have. It is a primary source of information on all the cash transactions that you operate, and it can also be used to verify data.

There are three formats in which cash books come: single column, double column, and triple column.

The single-column cash book is made of only the cash transactions done within the business. Transactions done on credit are not recorded when you create a single-column cash book. On the other side, the double column cash book records the transactions that are done through cash as well as the transactions that are done with banks. Transactions done with credit are still not included as part of this type of cashbook.

Lastly, the triple column cash book is where the receipt and the payment have three columns per side. This is the format that most large businesses would have as they do transactions with multiple modes like banking, cash, and even cash discounts.

What is a Cash account?

A cash account is a ledger account where all of the daily transactions of businesses would be recorded. It is similar to a ledger account, and it has two sides to it which are the debit and the credit side.

The debit side is normally on the left side, and it contains all of the cash receipts of a business, while on the right side lies the credit records, and it is where all of the payments that are done by the business would be placed in.

A cash account has a lot of benefits to the business, specifically in terms of taxes. By accounting cash, you will be able to properly figure out where the money goes. You can also be sure that you will only pay for taxes on the money that has been to you already. It also helps to ensure a better flow of cash so that you have funds for your taxes and more.

Cash accounting is important and very beneficial to businesses and individuals. For big companies, cash accounts are a great way to track different expenses and profits without the need for a bookkeeper.

Difference between Cashbook and Cash account

  • A cash book is where the original entries are, while a cash account is only a ledger where entries are copied from somewhere else.
  • Cash books have narrations after every entry, but cash accounts have no need for that.
  • A cash book is known as a subsidiary book, while a cash account is considered a ledger account.
  • There are three types of cash books, while cash accounts only have one format.
  • Cash accounts are simpler since there is only a credit and debit side, and it is more useful for small businesses and individuals, while cash books are more suitable for large businesses.

Conclusion

Cash is the bread and butter of every business, and that is why it is important to track your cash flow to have a better understanding of what is happening to your business. Having a record of where your money goes is an important step in making sure that your business works out the way that you need it to be. Cash books and cash accounts help out a lot in doing these.

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