Records and Language



What is a Cash Book?
The cash book is a record of all your business transactions that involve the payment and receipt of cash. If the cash book is properly written up it can provide valuable information to help in the running of the business and gives your accountant the necessary data for completion of reports and financial accounts.

The cash book records all the transactions that run through your bank account. The cash receipts section records all the deposits, and the cash payments section records all the payments. All these transactions are confirmed by the bank statement that you receive. Everything that goes through the bank account must show up in your cash book in one section or the other and is later reconciled with your bank statement.


Advantages and Disadvantages of a Cash book
The advantages of a cash book are:

  • Reliable and proven method of recording all financial transactions

  • It can save a lot of money by allowing you to do quite a bit of the work - work that normally your accountant would do

  • If you have to pay Sales Tax then the cash book can be set up in such a way that the Sales Tax amounts can be easily identified in its own column and easily accounted for to the IRS

  • Possible to see how the business is going on a month to month basis by looking through the cash book and analysing the breakdown of income and expenses


The disadvantages of a cash book are:

  • If your Sales Tax is based on an invoice basis then it is possible to calculate the Sales Tax from the cash book alone.

  • The writing up of a manual cash book is slightly outdated because of the use of computerised software. Sometimes writing up an offline or non computerised cashbook is not as cost effective but this depends on the type of business and its size.

  • It can take a lot of time to start and maintain. If the business is large then it is a cost that should be taken into account.

  • For the cash book to really be of use it needs to be transferred into financial statements which are the only reports that can show how the business is going and this involves extra time.


Why keep Accounting Records at all?
In many cases, accounting records are kept simply because it is required by law. It records information that enable the completion and filing of business tax returns to the IRS. That is, it is requirement of tax law that the correct profit of every business be easily ascertained to allow the appropriate tax to be levied for each tax year.

The profit of the business of course cannot be calculated unless full and adequate records of all business transactions are maintained.

Accounting records and accounting systems should quickly produce information to:

  1. Provide information that can be converted to reports for management to help management make decisions as to the direction of the business
  2. Provide information to assist professional advisers with matters to do with the business
  3. Provide a systemised record of the income and costs of the operation.
  4. Provide accounts and information for dealing with banks and other organisations