Tips On How To Prepare A Cash Book .

A cash book plays a critical function of book-keeping in your small business because it helps you track the movement of cash in and out of your business.

Its role is to facilitate the bookkeeping practice of recording sales and expenses only when cash is actually received or paid out.

Generally, the cash analysis book as a stand alone represents the simpler cash basis bookkeeping, and may be appropriate if your small business is a sole proprietorship such as a cash based retail shop.

However, if your objective is to transact professionally and even be able to qualify for bank credit, then you will need to adopt accrual basis bookkeeping.

Accruals accounting also comprises a cash analysis book which accounts for cash movements, but also has what we call a general ledger to account for any other non cash movements which may have impacted upon your business during a given period.

Working Principal

You can prepare cash books in several ways depending on convenience and knowledge. As a manually written worksheet, as a spreadsheet, or through a specialized accounting package. The principal is always the same.

A cash analysis book works under the double entry accounting principal. This states that for every Debit (Dr) entry you make in your books, their must be a corresponding Credit (Cr) entry to balance against and vise versa.


Here are some examples to show how cash books enable you account for the cash or cheque you received for sales, cash or cheque paid for bills and new sales merchandise, cash you remitted from your till to the bank. See model of spread sheet.

  • Each time you make a cash sale e.g $9.95, you raise a receipt and credit (Cr) Sales or the particular customer you sold to, and then debit (Dr) Cash of $9.95 in the respective column of your cash book.

  • In circumstances where the customer pays the above by cheque or transfers electronically to your bank , raise a receipt and credit (Cr) Sales or the particular customer you sold to, and then debit (Dr) Bank not Cash with $9.95 in the respective column of your cash book.

  • When you make a cash purchase e.g $9.95, you receive a receipt from your supplier and Debit (Dr) Purchases or the particular expense you paid for, and then Credit (Cr) Cash with $9.95 in the respective column of your cash book to show that cash has gone out of your business.

  • However, if paying by cheque or credit card, Dr (Debit) the expense as above and Credit (Cr) Bank to demonstrate a reduction to your bank balance.

You may occasionally find the need to transfer cash from your till to the bank or draw from the bank for business use.

  • In this case the cash book will show what in accounting terms we call a contra entry (C ). You debit (Dr) the bank column and credit (Cr) the cash column for transfers to the bank, and vise versa for cash withdrawals from the bank.

Before closing and confirming your book balances, prepare a

bank reconciliation statement, after which you will extract and adjust for direct debits and direct credits in your cash analysis book .

Return from Cash book, to Book-Keeping

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