Last reviewed: July 2026.
A two-column cash book records cash and bank transactions in separate money columns. In incomplete-records questions, it can reconstruct missing cash receipts, payments, drawings, capital introduced or bank movements.
The cash book is both a book of original entry and part of the ledger. The exact reconstruction depends on the evidence available and whether a cash or bank balance is missing.
Basic two-column format
| Receipts side | Cash column | Bank column | Payments side |
|---|---|---|---|
| Opening balances, cash sales, receipts from customers, capital introduced | Cash received | Bank deposits or direct bank receipts | Cash purchases, expenses, supplier payments, drawings and asset purchases |
| Contra transfer from cash to bank | Credit cash | Debit bank | Recorded on both sides with a contra reference |
Cash and bank balances
Cash normally has a debit balance because physical cash cannot be negative. A bank account may have a debit balance or a credit overdraft balance.
Opening balances appear on the receipts side for positive cash and bank balances. A bank overdraft appears on the payments side as an opening credit balance.
Contra entries
A contra entry transfers money between cash and bank without changing total liquid funds.
When 4,000 CU cash is deposited:
- Debit bank column 4,000 CU on the receipts side.
- Credit cash column 4,000 CU on the payments side.
Mark both entries with the same contra reference so the transaction is not posted again to an external ledger account.
Why it helps with incomplete records
Incomplete records often provide opening and closing balances plus known receipts and payments. The missing amount is found by balancing the relevant column.
Common missing figures include cash drawings, cash sales, payments to suppliers, owner capital and unrecorded expenses.
Worked cash drawings example
A trader has opening cash of 2,500 CU. During the year, cash sales are 48,000 CU and cash introduced by the owner is 5,000 CU. Recorded cash payments are 40,000 CU. Closing cash is 3,500 CU.
Missing drawings are:
2,500 + 48,000 + 5,000 − 40,000 − 3,500 = 12,000 CU
The 12,000 CU is the balancing payment in the cash column.
Worked bank receipt example
Opening bank balance is 10,000 CU. Known bank receipts are 75,000 CU, payments are 68,000 CU and closing bank balance is 24,000 CU.
The missing bank receipt is:
24,000 + 68,000 − 10,000 − 75,000 = 7,000 CU
Identify the source using customer records, capital evidence or other documents before posting the final journal.
Cash sales versus customer receipts
Cash sales are recognised as revenue immediately. Receipts from credit customers reduce receivables and do not create new revenue.
- Cash sale: debit cash or bank; credit revenue.
- Customer receipt: debit cash or bank; credit trade receivables.
Use invoice and customer-account evidence to avoid double-counting income.
Payments to suppliers
Payment to a supplier reduces trade payables. It is not automatically equal to purchases for the period because opening balances, closing balances, returns and discounts affect the purchase-ledger control account.
The computerised purchase ledger guide explains supplier-account movements.
Bank charges and direct debits
Bank charges, standing orders, loan interest and direct debits may first appear on the bank statement. Add them to the cash book before preparing the bank reconciliation.
See the bank statement and reconciliation guide.
Dishonoured receipts
If a customer payment is dishonoured, reverse the original bank receipt and restore the receivable:
- Debit trade receivables
- Credit bank
Record related bank fees separately according to their nature.
From cash book to ledger accounts
Cash-book entries update corresponding ledger accounts. Cash sales credit revenue; expense payments debit expenses; capital introduced credits capital; drawings debit drawings.
Review the ledger accounts guide for debit and credit rules.
Source-document checks
- bank statements and deposit records;
- receipts, invoices and remittance advice;
- supplier statements;
- petty-cash vouchers;
- loan and capital documentation;
- cash-count records.
The source documents guide explains how evidence supports entries.
Control and fraud risks
- unrecorded cash sales;
- personal payments hidden as expenses;
- delayed banking of receipts;
- duplicate supplier payments;
- altered cash-count records;
- unreconciled bank differences.
Separate cash custody, posting and reconciliation where practical.
Preparing the reconstructed cash summary
After balancing the cash book, summarise the reconstructed figures and explain how each was derived. Separate actual documented transactions from balancing figures and obtain additional evidence for material amounts.
A missing figure is a calculation result, not proof of its nature. For example, a balancing payment could be drawings, an unrecorded expense or a theft. Confirm it using owner records, invoices, cash counts and bank evidence.
Opening and closing capital link
Incomplete-records problems often combine the cash book with the net-assets method. Reconstructed cash drawings or capital introduced affect the profit calculation:
Profit = Closing net assets − Opening net assets + Drawings − Capital introduced
Use the same confirmed figures in both workings to avoid inconsistency.
Common mistakes
- treating all customer receipts as sales;
- treating all supplier payments as purchases;
- recording a contra entry only once;
- placing an overdraft on the wrong side;
- ignoring bank-only transactions;
- forcing a balancing figure without supporting evidence.
Key takeaway
A two-column cash book reconstructs cash and bank activity from available evidence. Balance each column carefully, distinguish revenue from settlements and verify every missing figure.
Official learning references: ACCA incomplete records and ACCA computerised accounting and bank/cash processes.