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A cash book is an accounting journal that records every cash and bank transaction a business makes, and simultaneously serves as the corresponding ledger account. Most accounting records require a separate journal entry and a separate ledger entry for every transaction. The cash book eliminates that duplication for cash and bank items by functioning as both records at once. There are three types: a single-column cash book that records only cash transactions, a double-column cash book that records both cash and bank transactions in separate columns, and a triple-column cash book that adds a discount column to both sides.
Think of the cash book like a combined diary and filing cabinet for your liquid assets: it records the event as it happens and organizes the information in the same step.
A contra entry occurs when money moves between a company's cash on hand and its bank account. For example, when a business deposits cash from the till into its bank account, both the cash column and the bank column of the cash book are affected simultaneously. Contra entries are marked with a "C" in the folio column to signal that the entry appears on both sides of the same book and does not represent an external transaction.
Because cash represents actual physical money, the cash column of a cash book can never show a credit balance. A negative cash balance would mean you paid out more physical currency than you ever received, which is impossible. If the calculated balance appears to be a credit, an error has been made in the recording. The bank column, however, can legitimately show a credit balance, which represents an overdraft on the bank account.
The balance in the bank column of the cash book should match the balance on the bank statement after adjusting for outstanding deposits and unpresented checks. The cash book is the starting point for bank reconciliation because it is the company's internal record of bank transactions. Discrepancies between the two records reveal either timing differences in processing or errors requiring correction.
Sources:
https://www.accountingtools.com/articles/what-is-a-cash-book.html
https://corporatefinanceinstitute.com/resources/accounting/cash-book/
https://www.wallstreetmojo.com/cash-book/
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