All financial transactions are ultimately settled in cash. Some transactions are settled immediately after purchase and sale and the rest are after few days. In fact, business transactions are settled sooner or later either in cash or through bank. Usually, small sums are settled in cash and large sums are settled through bank. There is a greater chance of misappropriating cash while performing cash and banking transactions. Cash can be misappropriated by showing no record or less record of cash receipts. Similarly, it can be misappropriated by showing more or fictitious record of payments. Hence, in order to have proper information and control over cash and banking transactions, every business maintains a separate cash book.
Cash Transaction
Cash Transaction
Cash transactions refer to cash receipts and payments. The receipts of cash from various sources and payment of cash on various heads are important routine transactions of a business. The main sources of cash receipts are sale of goods and services, sale of old assets, contribution of capital, loan borrowed, interest, rent, commission and other receipt from customers. The main heads of payments are purchase of goods, wages, rent, stationary, interest on loan borrowed, drawing, repayment of liabilities, advertising and payment to suppliers.
Banking Transaction
Banking transactions refer to all receipts and payment made through bank. It is inconvenient and risky affair to get and make payment of large sum directly in cash. A modern business operates bank account to settle all receipts and payment. It issues cheque for making payments accepts cheques for getting amount. It may also instructs its bank to pay and collect amount on its behalf. In fact, the bank is treated by the business as its agent for collecting all receipts and making all payments. Except the balance in petty cash account, no cash balance is maintained in the office of a modern business.