A cash book records all business transactions and is checked against bank statements for accuracy. Some companies use separate ledgers for incoming and outgoing money, and cash books can be physical or electronic. They are also used for audits to prevent fraud and ensure accuracy.
A cash book is a journal or ledger in which all business transactions are recorded. The cash book itself is typically arranged in chronological order, and the book is routinely checked against bank statements to ensure the book is accurate. Some companies use two ledgers: one for incoming money and one for outgoing. There are physical and electronic forms of this book, and some companies use both at the same time. Cash books are also used for internal and external audits, to ensure money is not spent illegally, and to ensure that all business statements are accurate by the government or an affiliated company.
The cash book itself is organized in a simple way. All records are chronological and are generally written to the ledger when the transaction is occurring, or shortly after the transaction is complete, so that the ledger is as accurate as possible. To make sure the book is accurate, managers usually review it on a routine basis, perhaps once a day or once a week, and will compare bank statements to make sure no transactions are lost and no transactions are fraudulent. .
To keep transactions separate, some businesses will use two different cash books. One will be for all incoming money, while the other will be for outgoing money. For a business with a large number of transactions, this may be ideal, because it will be easier to search through transactions to compare records with bank statements.
When the cashbook concept began, only paper books were available, but cashbooks can also be electronic. A physical book can be harder to steal, because a book can’t be hacked, but it can also take up a lot of space. An e-book takes up little space and typically provides users with tools and graphics to better record and present cash registers. Many companies use physical and electronic ledgers, so there are separate records, to make it more difficult for an employee or manager to steal money.
In addition to keeping track of all business transactions, another important function of the cash book is to serve as an audit tool. Audits can be internal or external; the company that owns the book initiates an internal audit and another entity, such as the government or an affiliated company, initiates an external audit. By checking cash records, comparing the records to bank statements, and counting the actual amount of money in the company, managers can uncover fraud or misuse of money. Keeping cash books also shows that the company is transparent, which usually leads to greater trust in the company.
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