Question

How does a cash book serve a dual purpose?

Or

Cash book is both a subsidiary book and principal book.

Answer 1

Cash book achieves a dual purpose. It is both a subsidiary book (book of original entry) and principal book. When a cash book is maintained, transactions of cash are not recorded in the journal. As all the cash transactions are recorded for the first time in the cash book, it is, therefore, a book of original entry. Also, when a cash book is prepared, cash account in the ledger is not prepared. In this way, 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.