Unit 9 - Cash Book

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A cash book is a financial journal where all cash receipts and payments are recorded before these entries are posted in the general ledger.

Receipts refer to money derived from sales, debtors, new capital, bank loans received and any other revenue.

Payments refer to money paid to creditors, for cash purchases, bank drawings, general business expenses and any other expenses incurred by the business.

Example of a Cash Book

The cash receipts and payments are listed chronologically and the cash book is periodically reconciled with the bank statements, as an internal auditing measure.

A cash book is important because it helps in keeping track of small purchases that could be easily overlooked. Ideally, the cashbook should be part of the petty cash fund set aside to take care of small expenses that do not warrant the use of a cheque or a credit card.

For small businesses, such as restaurants, that need easily available supplies when the need arises, a cash book is very important. Large firms usually prepare a two part cashbook with a cash disbursement journal and a cash receipts journal. Cash payments like petty cash purchases, accounts payable and operating expenses are recorded in the cash disbursement journal while cash receipts such as cash sales and accounts receivable are recorded on the cash receipts journal.


- If the closing balance is a credit, that would mean that the business has a bank overdraft.

- If the transactions do not match those in the bank statement, then the business would need to do a bank reconciliation (shown in an upcoming unit).


Prepare a cash book for company XYZ Construction Firm using the following information:

May 1st Cash in hand $27,500

May 5th Received $12,000

May 7th Insurance paid $2000

May 10th Furniture purchased $10,000

May 12th Sales $15,000

May 15th Purchases $26,000

May 17th Bank deposit $5,000

May 20th Rent paid $2000

May 25th Sales $2000

May 30th Salaries paid $5000

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