The Cash Book records monies paid into and from the business’ current bank account as well as receipts and payments of cash.
It is split into two parts; the receipts side of the cash book (which is traditionally recorded on the left hand side of the Cash Book) and the payments side of the cash book (recorded on the right hand side of the Cash Book).
The way a Cash Book is completed and then posted into the General Ledger depends on whether it is being used as part of the double-entry system. A business that uses the Cash Book as part of the double-entry system is one that records its cash and bank balances in the Cash Book and therefore does not need to have separate ledger accounts for its Bank or Cash in its General Ledger.
Example of a Cash Book that does not include bank and cash balances
Example of a Cash Book that includes bank and cash balances
The way we post information from the Cash Book to the General Ledger depends on whether or not the Cash Book is used as part of the double entry system. In this section we will describe how Cash Book Receipts are posted for both cases.
Posting Cash Book Receipts when the Cash Book is not used as part of the double-entry system
When posting the receipts side of the Cash Book to the General Ledger we will post the columns totals as follows:
DEBITS
- The total of the Cash column will be posted to to the debit side of the Cash Account in the General Ledger
- The total of the Bank column will be posted to the debit side of the Bank Account in the General Ledger
[NB. These columns are debits as they record increases in the value of the business’ assets; i.e. the amount of cash held, or the amount of money held at the bank]
CREDITS
- Credit the totals of each of the columns that describe the sources of the money received to appropriate account in the General Ledger; e.g.
- The total of the VAT column will be posted to the credit side of the VAT Account
- The total of the Cash Sales column will be posted to the credit side of the Sales Account (alternatively, some businesses use a Cash Sales Account for these types of sales)
- The total of the Sales Ledger column (also known as the Trade Receivables column) will be posted to the credit side of the Sales Ledger Control Account; and so on
- The one exception to the above is where an “Other” column is used to record any unusual or one-off type of receipt. Where this is the case we can either post the total to the credit side of an Other Receipts Account or alternatively, we will credit the individual receipts recorded in this column to appropriate accounts in the General Ledger (as illustrated below)
[NB. These are credits as they represent increases in liabilities or income (e.g. the amount of VAT due to HMRC, or increases in sales) or they represent a decrease in assets (e.g. a fall in the amounts due from customers)
Illustration 1
The receipts side of a business’ Cash Book for March is shown below. The figures that will be posted to the General Ledger are highlighted in yellow. These are the totals of each column except for the Other column where we will post each individual entry to the General Ledger.
The list of postings for the above Cash Book Receipts to the General Ledger is as follows:
Recording the postings in the General Ledger accounts
When recording the above postings in the General Ledger accounts we will record the period end date next to each transaction together with the description “Cash Book”. This way anyone wanting to know about a particular payment or receipt can trace the entry back to the Cash Book.
Posting Cash Book Receipts when the Cash Book is used as part of the double-entry system
Where the Cash Book includes the Bank and/or Cash balances, the postings to the General Ledger will be slightly different as no postings will be made to a Bank Account or a Cash Account. This is because these two accounts will not exist in the General Ledger as the information they would provide (i.e. the account balances) is already available in the Cash Book.
Illustration 2
The above Cash Book includes all the same transactions as recorded in Illustration 1 but also includes the bank and cash balances (these are highlighted in blue). The figures to be posted to the General Ledger are highlighted in yellow and do not include the totals of the Bank and Cash columns.
The list of postings for the above Cash Book Receipts would be as follows:
The above postings will then appear in the General Ledger accounts as shown below:
