The cash book is also a day book. It lists the money paid into and out of the business bank account (as opposed to petty cash). These transactions would include bank transfers, standing orders, direct debits, bank interest and charges.
The cash book is normally split into two halves, one for payments and one for receipts. It has several columns:
- folio (reference to the ledgers)
It also includes an analysis (so, for payments, it would be things like, wages, electricity, rent etc… and for sales it would be, for example, small widgets, large widgets etc…)
Bank statements should be used to check that the amounts listed in the cash book agree with the bank statement. This reconciliation of the cash book with the bank statement is an important check to ensure that no cash has gone missing. (Bank reconciliations will be the subject of a future post)