Question

Why Is Cash book both Subsidiary book and a principal book

Answer 1

When a cash book is prepared, the cash account in the ledger is not prepared. In this way, the cash book represents the cash accounts and hence, becomes the principal book of accounts. As such, the cash book is a subsidiary book as well as a principal book.

Answer 2

A cash book is both a subsidiary book and a principal book for a number of reasons.

• Firstly, a cash book is a subsidiary book because it records transactions related to cash receipts and cash payments. It is a detailed record of all the cash transactions of a business, including the date, amount, and purpose of each transaction. As such, it provides a subsidiary record to the general ledger, which is the principal book of account. The cash book is used to provide support for entries made in the general ledger, and to reconcile the bank account.

• Secondly, a cash book is a principal book because it directly impacts the financial statements of a business. The cash book serves as the primary record of cash transactions, and the balances in the cash book are used to create the cash account in the general ledger. The cash account is a principal account, because it is used to prepare the statement of cash flows, one of the primary financial statements that a business prepares.

• Finally, a cash book is both a subsidiary book and a principal book because it plays a key role in the accounting system of a business. It is a detailed record of all cash transactions, which is used to support entries made in the general ledger, and it is used to prepare the financial statements of the business. As such, it is an essential part of the accounting system, serving both as a subsidiary record and a principal record of cash transactions.

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