What Is a Cash Book?

A cash book is a journal, or ledger, in which all business transactions are recorded. The cash book itself is typically organized in chronological order, and the book is routinely compared with bank statements to ensure the book is accurate. Some businesses use two books — one for incoming and one for outgoing money. There are both physical and electronic forms of this book, and some businesses use both at once. Cash books also are used for internal and external auditing, to ensure there is no money going out illegally, and to ensure the government or an affiliate business that all the business statements are accurate.

The cash book itself is organized in a simple way. All records are chronological and are usually written in the book when the transaction is happening, or shortly after the transaction is complete, so the book is as accurate as possible. To make sure the book is accurate, managers will typically check the book routinely, perhaps once a day or once a week, and will compare any bank statements to make sure no transactions were missed and no transactions were fraudulent.

To keep transactions separate, some businesses will use two different cash books. One will be made 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 the transactions to compare the records with bank statements.

When the cash book concept started, only paper books were available, but cash books also can be electronic. A physical book may be harder to steal, because a book cannot be hacked, but it also may take up a lot of space. An electronic book takes up little space and usually gives the users tools and graphs to better record and present the cash records. Many business use both physical and electronic books so there are separate records, to make it harder for an employee or manager to steal money.

Aside from keeping track of all business transactions, another important cash book role is to serve as an auditing tool. Audits can be either internal or external; an internal audit is launched by the business that holds the book, and an external audit is launched by another entity, such as the government or an affiliate company. By checking the cash records, comparing the records with bank statements and counting the actual amount of money in the company, managers can discover fraud or misuse of money. Keeping cash books also shows that the company is transparent, which usually leads to more trust in the company.