Unit 9 - Cash Book

A cash book is a financial journal where all cash receipts and payments are
recorded before these entries are posted in the general ledger.

Receipts refer to money derived from sales, debtors, new capital, bank loans
received and any other revenue.

Payments refer to money paid to creditors, for cash purchases, bank drawings,
general business expenses and any other expenses incurred by the business.

Example of a Cash Book

The cash receipts and payments are listed chronologically and the cash book is
periodically reconciled with the bank statements, as an internal auditing measure.

A cash book is important because it helps in keeping track of small purchases

that could be easily overlooked. Ideally, the cashbook should be part of the petty
cash fund set aside to take care of small expenses that do not warrant the use of
a cheque or a credit card.
For small businesses, such as restaurants, that need easily available supplies
when the need arises, a cash book is very important. Large firms usually prepare
a two part cashbook with a cash disbursement journal and a cash receipts
journal. Cash payments like petty cash purchases, accounts payable and
operating expenses are recorded in the cash disbursement journal while cash
receipts such as cash sales and accounts receivable are recorded on the cash
receipts journal.

NOTE:

- If the closing balance is a credit, that would mean that the business has a bank
overdraft.

- If the transactions do not match those in the bank statement, then the business
would need to do a bank reconciliation (shown in an upcoming unit).

Cash Book For Assignment