What is the relation between ledger and cash book? How to merge these two? (2024)

A Cash Book is of different types. There may be a cash book with cash column only in which you post only transaction relating to cash, or there may be a cash book with two columns, that is bank and cash that shows a summary of both of your cash and bank account transactions. There is also a cash book with both cash and discounts columns. For example: Transactions related to payment of expenses in cash, or issuing a cheque to a party, or withdrawing cash from bank account, or depositing cash into the bank, or receiving some money in the form of cash or through a cheque. A transaction in which both bank and cash are involved is known as "Contra" entry denoted by "C".

While in the case of a ledger, it consists of all the entries of the accounts with which a person deals in the ordinary course of business. The ledger includes commonly the following sets of accounts:

1. Furniture account showing the furniture bought for carrying out the business.

2. Goods ("Purchases"/"Sales") account depicting the goods bought or sold in the ordinary course of business.

3. Accounts in the names of debtors to whom goods have been sold or services have been rendered on credit.

4. Accounts in the names of creditors to whom you owe money against certain goods or services acquired on credit.

3. Returns accounts that may be "Purchase Returns" that is the goods returned to the purchaser due to certain default, or "Sales Returns" that is the goods returned by the debtor due to certain default.

4. Cash Account showing only the income received in or expenses paid in cash.

5. Bank Account depicting the transactions of the bank.

6. Other accounts depicting the assets used or liabilities incurred in the business.

Both Cash Book and Ledger are summary of accounts, but cash book only has cash , or both cash and bank accounts,or cash with discount column, while ledger has other accounts too including cash and bank.

If you have prepared both bank and cash accounts in the ledger, you can merge the two in a cash book.