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The books of prime entry, discounts and sales tax

4.4 Cash book

The term ‘cash book’ dates back to the days when organisations dealt only in cash
transactions (i.e. notes and coins). Nowadays business entities rarely deal in cash
unless they are retail businesses, so the term ‘cash book’ refers to any book that
records monies received and paid. Most entities will record payments and receipts in
two separate parts of the cash book. Cash receipts book and cash payments book.

4.5 Discount columns in the cash book

The cash book can also be used to record settlement or prompt payment discount
that has been allowed to credit customers or received from credit suppliers.
Settlement discount often involves a large number of small-value transactions, so it is
possible that the nominal ledger (which contains the discount ledger accounts),
would soon fill up with the detail of a large number of small-value transactions. By
adding an extra column to each side of the cash book, the discount can be recorded
at the point of either deducting discount received from amounts due to credit
suppliers or recognising discount allowed deducted by credit customers on amounts
due to the entity (which is when it becomes known), and the total of those columns
used to post the entries required in the nominal ledger.

4.6 The petty cash book

The petty cash book is similar in many ways to the cash books except that it is
intended to be used for small payments made in cash. It usually operates on an
imprest system whereby an agreed balance of cash is held by an individual
nominated as the petty cashier.

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