Cash Book

Loading the player...

What is a 'Cash Book'

A cash book is a financial journal that contains all cash receipts and payments, including bank deposits and withdrawals. Entries in the cash book are then posted into the general ledger. Larger firms usually divide the cash book into two parts: the cash disbursement journal that records all cash payments, such as accounts payable and operating expenses, and the cash receipts journal, which records all cash receipts, such as accounts receivable and cash sales.

BREAKING DOWN 'Cash Book'

The cash book is set up as a ledger in which all cash transactions are recorded according to date. It is a book of original entry and final entry. That is, the cash book serves as the general ledger. There is no need, as in a cash account, to transfer to a general ledger.

Cash Book vs. Cash Account

There are differences between a cash book and a cash account. A cash book is a separate ledger in which cash transactions are recorded, whereas a cash account is an account within a ledger. A cash book serves the purpose of both journal and ledger, whereas a cash account is structured like a ledger. Details or narration are required in a cash book, but not in a cash account. Finally, cash books use a ledger folio, while cash accounts use a journal folio.

There are numerous reasons why a business might record transactions using a cash book instead of a cash account. Daily cash balances are easy to access and determine. Mistakes can be detected easily through verification, and entries are kept up-to-date, since the balance is verified daily.

Cash Book Format

All transactions in the cash book have two sides: debt and credit. All cash receipts are recorded on the left hand side, and all cash payments are recorded by date on the right hand side. The difference between the left and right side shows the balance of cash on hand, which always shows a debit balance.

The cash book is set up in columns. The date column is the date of the transaction. In the first line, the accountant inputs the year, and in the second line, the accountant inputs the name of the month, followed by the date. In the next column, the accountant inputs the name of the opposite or contra account, along with a small description or narration of the transaction. In the ledger folio column, the accountant inputs the number of the ledger that holds the account, and the amount of the transaction. If the transaction comes with a voucher, that column may be added as well.

RELATED TERMS
  1. General Ledger

    A company's main accounting records. A general ledger is a complete ...
  2. Asset Ledger

    The part of a company's accounting records that detail the journal ...
  3. Ledger Balance

    The balance of a customer account as shown on the bank statement. ...
  4. Cash Cost

    A cash basis accounting cost recognition process that classifies ...
  5. Accounts Receivable Subsidiary ...

    An accounting ledger that shows the transaction and payment history ...
  6. Cash Position

    The amount of cash that a company, investment fund or bank has ...
Related Articles
  1. Investing

    What's Recorded in a Cash Book?

    A cash book is an accounting book that records all cash receipts and cash payments before they’re recorded in a business’s general ledger.
  2. Investing

    What's a General Ledger?

    As the heart of the double-entry accounting system, the general ledger is the record of a company's entire financial transaction history. The left side of the general ledger is for debits: assets, ...
  3. Investing

    Calculating Net Cash

    A company’s net cash is its total cash remaining after it subtracts all liabilities.
  4. Investing

    Understanding Cash and Cash Equivalents

    Cash and cash equivalents are items that are either physical currency or liquid investments that can be immediately converted into cash.
  5. Investing

    Cash Flow Statement and Financial Health

    A cash flow statement records the amounts of cash and cash equivalents entering and leaving a company.
  6. Markets

    Cash: Can A Company Have Too Much?

    Cash is something companies love to have. But if they are not using it there could be problems.
  7. Investing

    Why Cash Management Is Key To Business Success

    Businesses need to generate a healthy cash flow to survive, but not hold too much so that inventory suffers or investment opportunities are missed.
  8. Investing

    Operating Cash Flow: Better Than Net Income?

    Differences between accrual accounting and cash flows show why net income is easier to manipulate.
  9. Investing

    What Is A Cash Flow Statement?

    Learn how the CFS relates to the balance sheet and income statement as a part of a company's financial reports.
  10. Markets

    What is the Cash Ratio?

    The cash ratio is the ratio of a company's total cash and cash equivalents to its current liabilities.
RELATED FAQS
  1. What's the difference between the general ledger and a general journal?

    Keeping records for most organizations require a double-entry bookkeeping system, which revolves around transactions in the ... Read Answer >>
  2. Where do companies keep their cash?

    If you have ever looked over a company's balance sheet, you have no doubt noticed the first account under the current asset ... Read Answer >>
  3. How are cash purchases recorded on a company's income statement?

    Take a deeper look at the treatment of cash payments on a company's financial statements, including how specific purchases ... Read Answer >>
  4. What is double entry bookkeeping and how does it work in the general ledger?

    Learn about the double entry method of bookkeeping and how it works in the general ledger. Every accounting transaction has ... Read Answer >>
  5. How can I use Excel as my business's general ledger?

    Follow these steps to set up a general ledger accounting system in Excel. A small business can use Excel as a substitute ... Read Answer >>
  6. What is the difference between accrual accounting and accounts payable?

    Understand the difference between accrual accounting, an accounting method, and accounts payable, which is a ledger entry ... Read Answer >>
Hot Definitions
  1. GBP

    The abbreviation for the British pound sterling, the official currency of the United Kingdom, the British Overseas Territories ...
  2. Diversification

    A risk management technique that mixes a wide variety of investments within a portfolio. The rationale behind this technique ...
  3. European Union - EU

    A group of European countries that participates in the world economy as one economic unit and operates under one official ...
  4. Sell-Off

    The rapid selling of securities, such as stocks, bonds and commodities. The increase in supply leads to a decline in the ...
  5. Brazil, Russia, India And China - BRIC

    An acronym for the economies of Brazil, Russia, India and China combined. It has been speculated that by 2050 these four ...
  6. Brexit

    The Brexit, an abbreviation of "British exit" that mirrors the term Grexit, refers to the possibility of Britain's withdrawal ...
Trading Center