Cash Book, Cheques and Bank draft

Cash book in detail:

Now if we talk about cash book, it is of three types;

·        Single Column Cash Book.

·        Double Column Cash Book.

·        Triple Column Cash Book.

Single column Cash Book--       

In Single Column Cash Book only cash transaction are recorded in the books. All the cash receipts are recorded in the left side and all cash payments are recorded in right side. There is also a column of ledger folio to support the basis of evidence that is, to record the page on which the respective ledger has been recorded.

Double Column Cash Book--

In the Double Column Cash Book apart from cash transaction, transactions by cheque are also being recorded in it. Thus it contains two column cash and bank apart from ledger folio column.

In this double column cash book we need to understand some important concepts:

Cheque:

Bank generally provides it depositor a cheque book containing 20 or more pages of cheque it allows depositor to withdraw money from bank or to give payment to the creditors.

In Negotiable Instrument Act cheque is defined as “an unconditional order, drawn upon a specified banker, signed by the maker, directing the banker to pay on demand a certain some of money only to the order of a person or to the bearer of the instrument”.

From the above definition it is clear that:

·        Cheque is an order.

·        There are three parties in the cheque 1) Maker, 2) Drawee and 3) Payee.

·        Maker is the person who draws cheque.

·        Drawee is the bank on which the cheque is drawn.

·        And Payee is the person who is named in the cheque for receiving payment.

Now there are two types of cheque:

Bearer Cheque and Order Cheque—let’s learn about them:

Bearer Cheque:

Bearer cheque is like cash- any person who presents the cheque in banks counter can get the payment. Means bank has no obligation to ascertain that the payment is made to the right person.

Order Cheque:

Unlike bearer Cheque, in order cheque bank has obligation to ascertain that the payment in made to the right person. And in this cheque, order is given to make payment to the specific person.

2. Bank Draft:

Bank Draft is the most important service done by the bank. In the bank draft, Banks make payment on the behalf of the payer and it is guaranteed by the issuing bank. What bank does is, immediately debits the amount in payers account and therefore has no risk. Thus the payee gets some surety once bank draft has been issued.  On the one hand bank has no risk for this service and on the other hand, bank charges fees for that service. Thus, payer, payee and banker all are benefited by this service.

This was how I explained about cash book and its related topics. I you have any question regarding these concepts please write on the comment box below.