What is a Cash Book?

A cash book is a subsidiary ledger in which are stored all cash receipt and cash payment transactions. It is the primary repository of cash-related information for a business. The information in the cash book is periodically aggregated and posted to the general ledger. The information in the cash book is routinely compared to the bank's records via a bank reconciliation to ensure that the information in the book is correct. If not, an adjusting entry is made to bring the cash book into conformance with the bank's information.

The cash book is commonly subdivided into a cash receipts journal and a cash disbursements journal when there are many transactions. Doing so reduces the clutter in a single source document or file. Under this approach, transactions recorded in the cash disbursements journal would primarily include payments made to suppliers who have issued billings to the company. Conversely, transactions recorded in the cash receipts journal would primarily include cash received from customers who have been billed for sales on credit.

In a smaller business that experiences less transactional volume related to cash, all cash transactions are recorded within a single cash book.

How is Information Recorded in a Cash Book?

The information in a cash book is entered in chronological order, which makes it easier to research transactions at a later date. A common researching path is to begin with a possible cash issue in the general ledger, and then trace the posting entry back to a specific date range in the cash book.