Cash Book: What They Are and How to Use Them

A cash book is a type of accounting record that tracks cash flow and it is also referred to as a cash receipts journal. Cash books are often used by small businesses, sole proprietorships and not-for-profit organizations. They are typically simple in design but have the ability to track cash receipts and cash payments from a business’s customers or donors. 

The function of cash books is to provide an accurate representation of cash collected (incoming) versus cash paid out (outgoing). This will help the company know when it has enough money to pay its bills, for example. 

Cash Book accounting is very important because it ensures that all transactions are accounted for accurately and on time so there won’t be any surprises later on with regard to your financial statements at year-end.

What is a Cash Book in Accounting?

A cash book is a type of accounting document that records cash transactions. Cash books are used for both business and personal use.

Cash books can be classified as either simple cash books or double-entry cash books, depending on the method of recording cash receipts and cash payments. The type of cash book you should use depends on your needs or what kind of information you would like to keep track of.

Cash books in accounting

Types of Cash Books

As we mentioned above, a cash book is a record of cash received and cash paid from the date of the opening balance to date. They are used to track cash flow on an ongoing basis. Generally,  it can be classified as either single-entry or double-entry accounting methods, but there are actually four. Here, we will take a closer look at these 4 types and how they work:

  • Single Column or Single Cash Entry
  • Double Column Entry
  • Three Column Entry
  • Petty Cash

Single Column Cash Book Entry

The single-column cash book is the simplest and most straightforward form. It is an easy method to track single-entry accounting, where only one single cash column needs to be used for the date recorded on either side of a transaction.

In this type of system, every cash receipt must have another payment made at some point in time. The single-column cash book entry can also work with double entry if you would like a more detailed recording because it has two columns: Date (a) and Amount (b). In both cases, these are just simply written over each other vertically in order for transactions to balance out but does not include bank deposits or a bank balance.

A single column cash book requires less space than a double-column ledger account; however, it does not provide as much information about the receipts or payments that were made.

This method also referred to as a single entry, records only cash transactions, but does not show what has been spent in cash yet (e.g., salaries, office supplies). It is easy to use for businesses with straightforward finances where all money comes in and goes out by way of cash transactions, so it’s like having a purchases journal.

Here’s a single column cash book example:

1st JulyOffice groceries£300
5th JulyCredit sales£900
7th JulyWithdraw cash£150
12th JulyPaid accounting software£99
13th JulyRevenue Earned but not received£1750
Single entry cash book example

Double Column Cash Book

The double-column entry system bookkeeping in accounting is a great way to make sure your business has reliable financials.

This method records both entries and exits of cash which means that it shows what you have spent on cash, cash coming in and cash going out. A double-entry bookkeeping spreadsheet is used by accounting professionals who need to work with a more complicated cash book that includes a bank account, with a debit side and a credit entry.

The two-column entry keeps bank and customer accounts separate, so there is one column for recording the ledger’s debit entries or money going out of the company (the right-hand side) like bank transactions, while another column records credit transactions or money coming into your organization (left).

The double-column cashbook system is great for two reasons: it enables your business to reconcile bank and customer accounts, and you can determine the net result of transactions.

It also provides a more accurate picture of what’s going on in your company if you compare cash payments side and bank account transactions.

When we say “accurate”, what we mean is that this accounting method will give you an idea of how much money actually came into or went out from the company account; with single-column cash books, all entries are recorded at once which means they’re not as reliable as double-column ones.

This double-column system ensures reliability by separating the receipts side from payments records.

Here’s a double-entry cash book bookkeeping example:

1st JulyBalance b/d01 £70001st AprilGroceries02 £300
5th July Sales03 £ 9002nd AprilOffice furniture04 £ 200
7th JulySales05 £ 17507th July Withdraw cash06 £ 150
13th JulyRevenue earned but not received07 £ 175012th JulyAccounting Software08 £ 99
31st AprilSalary09 £ 1400
April 2021Account Balance £9251
Double-entry cash book example

Three Column Cash Book

The most recent trend in accounting is a three column cash book.

The three-column cash book is one type that has the following columns: Cash, Discount and Bank. 

Many organizations now deal with banking instruments like cheques and bills of exchange along with cash, so it’s important to have a bank column in the cash book for accounting entries. When you receive a cheque that was deposited on the same day, make an entry in your bank column by debiting the account. If not done within 24 hours into another account then this is recorded as contra-entry.

To better explain this cash book concept, contra entries are those times when a transaction affects both the cash account and bank account at once – like paying your rent or utility bill with money from savings or if someone deposits you £1500 into your bank account but you withdraw £400 to pay your rent. The more confusing part is that contra entries increase cash and decrease bank deposits (or vice versa), so be sure to keep an eye out for all these transactions on both sides!

Three column Cash Books provide organizations dealing with both traditional currencies like coins as well as newer forms such as cheques given instead when people pay off debts electronically.

1st JulyBAL b/d01 £70001st JulyBAL b/d02 £ 3000
5th JulySales0310 £ 900 5th JulyFurniture0420 £ 200
7th JulyChq05 £ 17508th JulyDEP05 £ 1750
8th JulyBank05 £ 17509th JulyDEP06 £ 750
9th JulyCash £ 750
Three column cash book example. Chq = cheque. BAL = balance. DEP = Deposit

Petty Cash Book & General

Petty cash refers to money that has been spent on small expenses (e.g., a sandwich for lunch), while general cash refers to larger sums that have not yet been allocated to specific items.

Petty Cash Book Format 

The petty cash book has a debit and credit side like the general cash book. All receipts for payment are recorded with debits on one page, while all payments are recorded as credits on another page by the current holder of that position (the “petty” keeper). The journal entry is done to show an increase in assets when receiving money from customers but also decreases due to paying out funds at any given time —  it’s critical not only because it helps keep track of things better, but if you were ever audited or investigated this could be used as proof against theft allegations since there would have been documentation showing both sides.

How to Create a Cash Book in Excel

The cash book is a separate record of how much money comes in and how much goes out. This accounting method provides a more accurate picture of what’s going on with the company, by separating receipts (left side) from payments records (right). To create one in Excel, you can start by inserting tabs into your spreadsheet to create two columns:

  • Receipts column
  • Payments column

Then follow these steps for each type of transaction that takes place:

Enter the amount coming in or paying out as well as an appropriate description in the receipt tab; this should be highlighted yellow so it stands out against all other entries.

The functions you need to use in Excel are:

  • Design a template using the Excel Table tool
  • Create and use a simple IF statement
  • Analyse using VLOOKUP function
  • Calculate totals with the DSUM command

Column headers to include in your spreadsheet are:

  • Date
  • Type: Receipt
  • Description
  • Ref
  • Analysis
  • Value

Once you have created it, highlight your cells and insert a table tool. Highlight the box My table has headers. Choose a Table Style you like. Now that is ready, you can follow this youtube tutorial about how to create a cash book in Excel.

Cash Account vs Cash Book

In accounting, a cash account may refer to a ledger in which all cash transactions are recorded. The cash account includes both the cash receipts and the cash payments journal but it can act as a subsidiary ledger.

The cash receipts journal is a record of cash received by the business. The cash payments journal is a record of cash paid out by the company, such as wages or other expenses.

What is a General Ledger?

The general ledger is the foundation of a company’s double-entry accounting system. It helps you create financial reports so that you can keep track of your assets, liabilities, revenues and expenses.

The trial balance summarises data from all sub-ledgers to give an overview of how successful or unsuccessful your business has been on paper. This information will also help with creating important documents like the cash flow statement which measures income versus expenditures over time in order to make sure funds are being used wisely for investments.

Advantages of Having a Cash Book

  • Provides a detailed record of all daily transactions involving cash so you can clearly track your cash flow
  • Allows organisation and better tracking of cash exchanges
  • Guarantees that money is not being lost or misplaced
  • Keeps financial records organised for auditing or tax purposes
  • Provides a detailed record of all daily transactions involving cash so you can clearly track your cash flow
  • Allows organisation and better tracking of cash exchanges
  • Guarantees that money is not being lost or misplaced
  • Keeps financial records organised for auditing or tax purposes

To Sum Up!

A Cash Book, also known as cash accounting records, are meant to show a detailed record of all daily transactions that involve cash. They usually come with columns for date, payee or vendor name, the amount paid/received in cash (and sometimes other details).

The cash book includes both the cash receipts journal and the cash payments journal (or list of cash payments for the business). It helps you keep track of all your cash transactions and make sure that they match up with what’s on your ledger sheet. If there are any discrepancies in the books, it could lead to issues further down the line — so be careful!

In conclusion, it is crucial for businesses — even those with straightforward finances — to use a system like a Cash Book so they can track their daily transactions when their business grows or revenues increase as this will allow them to know how much funds are available at any given time.

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