Cash Book
• All cash transactions (receipts and payments) are recorded in the cash book.
• Cash book balance shows the amount of cash in hand at a particular time.
The balance column shows the net balance of cash available for use.
The ledger code shows the code of that head of account which contains the second effect of the cash transactions because debits and credits are always equal in financial accounting.
Bank Book
• All bank transactions are recorded in the bank book.
• The balance of bank book reflects the cash available at bank at a particular time.
• The format of bank book is same as that of cash book except the column of cheque no.
• This column is added in the format because all payments made by cheque and the number of cheque is written in that column to keep the accounting record updated.
Accounting period is any period for which a profit and loss account is prepared.
Debit & Credit Balances
• It has already been mentioned that both sides i.e. Debit and credit side of a ledger must be equal.
• If debit side of a ledger is greater that credit side. The balance will be written on the credit side and
it will be called Debit Balance. The reason being, the balance is written on the credit side because of
excessive debit balance. Therefore, it is called Debit Balance.
Similarly, if credit side is greater than debit side, the balance will be written on the debit side. This
balance is called. Credit Balance.
Trial Balance
• At the end of accounting period, a list of all ledger balances is prepared. This list is called trial
Balance.
• Both sides of trial balance i.e. Debit side and credit side must be equal. If both sides are not equal,
there are errors in the books of accounts.
RULES OF DEBIT & CREDIT
• Increase in expense is Debit (Dr.)
• Decrease in expense is credit (Cr.)
• Increase in income is credit (Cr.)
• Decrease in income is Debit (Dr.)
