The Cash Book (“CB”) records the money paid into and out of its current bank account. If the business also holds and uses cash (i.e. notes and coins) it will also record receipts and payments of cash.
The Cash Book can be laid out in several different ways but the most common records receipts of money on the left hand side of the page and payments on the right hand side. Some businesses go further and actually split the Cash Book into two separate books, Cash Book Receipts and Cash Book Payments.
The receipts side of the Cash Book
Unsurprisingly, the receipts side of the cash book records the money received by the business. It consists of several columns that would record the following information about the money received:
- The date of receipt
- A description of the source of the money (i.e. who the money was received from or, alternatively, a description of what the money was for)
- Columns to record the where the money went; i.e.
- A column to record money to paid into the business’ current bank account
- A column to record cash that was received but was not immediately banked. [Note that if a business never receives cash or it always pays any cash received straight into the business’ current bank account then it will not require this column]
- A column to record a reference for the money received. The reference could be the unique reference number from a bank paying-in slip, or a customer reference code, or a bank statement number, or something else that would enable any user to check the amount or trace it to other documentation
- Columns to record and analyse what the money received was for. Typically, we will include the following columns as a minimum:
- A column to record any VAT charged on cash sales (i.e. sales where no period of credit is given to the customer)
- A column to record the net value of any cash sales
- A column to record receipts from credit customers (this column is usually headed “Sales Ledger”, “Trade Receivables” or “Trade Debtors”)
- If the business regularly receives money from other sources (e.g. monthly receipts from property rented out) we will add further columns
- A column to record other occasional types of receipts which may arise from time to time (this column will be headed “Other Receipts” or something similar)
At the end of each period, a bookkeeper will add up the totals of the different columns. A cross-add check can then be made to help ensure that no errors have been made; the total of the columns recording what happened to the money received (in the above example the Cash and Bank columns) should equal the total of the columns that analyse the source of the money received (in the above example this would be the VAT, Cash Sales, Sales Ledger and Bank Interest columns).
The payments side of the Cash Book
The payments side of the Cash Book records the money paid by the business. As was the case with the receipts side of the Cash Book we will typically use several columns that record the following information about the money paid:
- The date of payment
- A description of who the money is paid to or a description of what the payment was for
- Columns to record the account the money was paid from; i.e.
- A column to record payments made from the business’ current bank account
- A column to record any payments made in cash cash paid. Note that if a business never makes any cash payments then this column would not be required.
- A column to record a reference for the money paid. The reference could be a cheque number, a supplier reference code or something else that would enable anyone to check the amount paid or trace it to other documentation
- Columns to record and analyse what the payment was for. Typically, we will include the following columns as a minimum:
- A column to record any VAT charged on cash purchases (i.e. purchases of goods or materials where no period of credit is given to the business by the supplier)
- A column to record the net value of any cash purchases
- A column to record payments to credit suppliers (this column is usually headed “Purchases ledger”, “Trade Payables” or “Trade Creditors”)
- If the business makes other regular payments receives money for other purposes we will add further columns as necessarily (e.g. a business that pays wages to employees might include a column to record the net wages paid and another to record payments of PAYE Income tax and National Insurance to HM Revenue & Customs)
- A column to record other occasional types of payments which may arise from time to time (this might be headed “Other payments” or something similar)
At the end of each period, a bookkeeper will add up the totals of the different columns. A cross-add check can then be made to help ensure that no errors have been made; the total of the columns recording the account from which the payment was made (in the above example this would be the Cash and Bank columns) should equal the total of the columns analysing what the payment was for (in the above example this would be the VAT, Cash purchases, Purchases ledger and Rent columns).
