Cash Book and Bank Statements

Cash Book
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:

  • date
  • narrative
  • folio (reference to the ledgers)
  • total

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
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)

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2 responses to “Cash Book and Bank Statements

  1. If the business mainly dealt in cash with its customers and not paid into the bank account. Would the income be logged in a cash book or just recorded in the sales ledger?

  2. I would recommend keeping a cash book type of record of receipts in addition to recording them in the sales ledger. Whether this takes the form of listing each customer and amount or whether the amounts are added together under “cash takings for the day” depends on the size and nature of the business. If the business is operating “double-entry” bookkeeping, a cashbook/cash account will be necessary for such a system to work.