What Is a Cash Book? How Cash Books Work, With Examples

By Alicia Tuovila
Updated June 20, 2024
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Natalya Yashina
Natalya Yashina
Reviewed by Natalya Yashina
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Natalya Yashina is a CPA, DASM with over 12 years of experience in accounting including public accounting, financial reporting, and accounting policies.
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Part of the Series
The Evolution of Accounting and Accounting Terminology
Terms A-B
  1. Accounting History and Terminology
  2. Absorption Costing
  3. Amortization
  4. Average Collection Period
  5. Bill of Lading
Terms C
  1. Cash Book
    CURRENT ARTICLE
  2. Cost of Debt
  3. Cost of Equity
  4. Cost-Volume-Profit (CVP) Analysis
  5. Current Account
Terms D-E
  1. Days Payable Outstanding
  2. Depreciation
  3. Double Declining Balance Depreciation Method
  4. EBITDA
  5. Economic Order Quantity
Terms F-M
  1. Factors of Production
  2. Fiscal Year (FY)
  3. General Ledger
  4. Just in Time (JIT)
Terms N-O
  1. Net Operating Loss (NOL)
  2. Net Realizable Value (NRV)
  3. Noncurrent Assets
  4. Operating Cost
  5. Operating Profit
Terms P-S
  1. Production Costs
  2. Pro Forma Invoice
  3. Retained Earnings
  4. Revenue Recognition
  5. Sunk Cost
Terms T-Z
  1. Triple Bottom Line (TBL)
  2. Variable Cost
  3. Work-in-Progress (WIP)
  4. Write-Off
  5. Year-Over-Year (YOY)
  6. Zero-Based Budgeting (ZBB)

What Is a Cash Book?

A cash book is a financial journal that contains all cash receipts and disbursements, including bank deposits and withdrawals. This is the main area where businesses record any and all cash-related information. Entries are normally divided into cash payments and receipts. All of these are posted in the company's general ledger.

Key Takeaways

  • A cash book is a subsidiary of the general ledger in which all cash transactions during a period are recorded.
  • The cash book is recorded in chronological order, and the balance is updated and verified on a continuous basis.
  • Larger organizations usually divide the cash book into two parts: the cash disbursement journal and the cash receipts journal.
  • A cash book differs from a cash account in that it is a separate ledger in which cash transactions are recorded, whereas a cash account is an account within a general ledger.
  • There are three common types of cash books: single column, double column, and triple column.
Cash Book

Investopedia / Joules Garcia

How a Cash Book Works

A cash book is set up as a subsidiary to the general ledger in which all cash transactions made during an accounting period are recorded in chronological order. Larger organizations usually divide the cash book into two parts: the cash disbursement journal, which records all cash payments, and the cash receipts journal, which records all cash received into the business.

The cash disbursement journal would include items such as payments made to vendors to reduce accounts payable, and the cash receipts journal would include items such as payments made by customers on outstanding accounts receivable or cash sales.

The primary goal of a cash book is to manage cash efficiently, making it easy to determine cash balances at any point in time, and allowing managers and company accountants to budget their cash effectively when needed. It is also much faster to access cash information in a cash book than by following the cash through a ledger.

Types of Cash Books

There are several types of cash books that entities can use, whether they're businesses or individuals. We've highlighted some key details about single-, double-, and triple-column cash books with examples of what each looks like below.

Single-Column Cash Book

The single-column cash book is the easiest type of cash book to use. This type is commonly used by individuals who want to keep track of their own money and finances. To use the single-column version of the cash book, transactions are noted in one column. The user updates the total amount by the end of the day.

Single-Column Cash Book
Date Description Folio Number Amount Received Date Description Folio Number Amount Paid

Double-Column Cash Book

The second type of cash book is called the double-column cash book. As the name implies, there are two columns for this type of cash book. It allows users to keep more detailed notes about their transactions.

Double-Column Cash Book
 Date Description Folio Number Amount Received Bank Date Description Folio Number Amount Paid Bank
                   

Triple-Column Cash Book

The triple-column cash book has three columns and is the most complicated choice of the three. This version has other detailed information, such as purchase or sales discounts, in addition to the information found on the single- and double-column cash books. Users often use some form of accounting software to manage the triple-column cash book.

Triple-Column Cash Book
 Date  Description Folio Number Amount Received Bank Discount Date Description Folio Number Amount Paid Bank Discount
                       

The petty cash book may be considered to be a fourth type of cash book. This option is used to record daily petty cash transactions.

Recording in a Cash Book

All transactions in a cash book have two sides: debit and credit. All cash receipts are recorded on the left-hand side as a debit, and all cash payments are recorded by date on the right-hand side as a credit. The difference between the left and right sides shows the balance of cash on hand, which should be a net debit balance if cash flow is positive.

The cash book is set up in columns. A typical single-column cash book will have these column headers:

These headers are present for both the left side showing receipts and the right side showing payments. The date column is the date of the transaction.

Because the cash book is updated continuously, it will be in chronological order by transaction. In the description column, the accountant writes a short description or narration of the transaction. In the reference or ledger folio column, the accountant inputs the account number for the related general ledger account. The amount of the transaction is recorded in the final column.

Cash Book vs. Cash Account

A cash book and a cash account differ in a few ways. A cash book is a separate ledger in which cash transactions are recorded, whereas a cash account is an account within a general ledger. A cash book serves the purpose of both the journal and ledger, whereas a cash account is structured like a ledger. Details or narration about the source or use of funds are required in a cash book but not in a cash account.

There are numerous reasons why a business might record transactions using a cash book instead of a cash account. Daily cash balances are easy to access and determine. Mistakes can be detected easily through verification, and entries are kept up to date, as the balance is verified daily. By contrast, balances in cash accounts are commonly reconciled at the end of the month after the issuance of the monthly bank statement.

What Is the Purpose of a Cash Book?

A cash book is set up as a subsidiary to the general ledger in which all cash transactions made during an accounting period are recorded in chronological order. The primary goal of a cash book is to manage cash efficiently, making it easy to determine cash balances at any point in time, allowing managers and company accountants to budget their cash effectively. It is also much faster to access cash information in a cash book than by following the cash through a ledger.

What Are the 2 Components of a Cash Book?

Larger organizations usually divide the cash book into two parts: the cash disbursement journal, which records all cash payments, and the cash receipts journal, which records all cash received into the business. The cash disbursement journal would include items such as payments made to vendors to reduce accounts payable, and the cash receipts journal would include items such as payments made by customers on outstanding accounts receivable or cash sales.

What Is the Difference Between a Cash Book and a Cash Account?

A cash book and a cash account differ in a few ways. A cash book is a separate ledger in which cash transactions are recorded, whereas a cash account is an account within a general ledger. A cash book serves the purpose of both the journal and ledger, whereas a cash account is structured like a ledger. Details or narration about the source or use of funds are required in a cash book but not in a cash account.

The Bottom Line

Keeping records is key to maintaining the financial health and well-being of any business or household. Using a cash book is a great way to help manage and account for cash-related transactions, including receipts and payments. These records can be transferred to a general ledger and used to update records and/or file year-end taxes.

Article Sources
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  1. Accounting Tools. "Cash Book Definition."

  2. GoCardless. "How to Use a Cash Book in Accounting."

  3. Accounting Tools. "Cash Account Definition."

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Part of the Series
The Evolution of Accounting and Accounting Terminology
Terms A-B
  1. Accounting History and Terminology
  2. Absorption Costing
  3. Amortization
  4. Average Collection Period
  5. Bill of Lading
Terms C
  1. Cash Book
    CURRENT ARTICLE
  2. Cost of Debt
  3. Cost of Equity
  4. Cost-Volume-Profit (CVP) Analysis
  5. Current Account
Terms D-E
  1. Days Payable Outstanding
  2. Depreciation
  3. Double Declining Balance Depreciation Method
  4. EBITDA
  5. Economic Order Quantity
Terms F-M
  1. Factors of Production
  2. Fiscal Year (FY)
  3. General Ledger
  4. Just in Time (JIT)
Terms N-O
  1. Net Operating Loss (NOL)
  2. Net Realizable Value (NRV)
  3. Noncurrent Assets
  4. Operating Cost
  5. Operating Profit
Terms P-S
  1. Production Costs
  2. Pro Forma Invoice
  3. Retained Earnings
  4. Revenue Recognition
  5. Sunk Cost
Terms T-Z
  1. Triple Bottom Line (TBL)
  2. Variable Cost
  3. Work-in-Progress (WIP)
  4. Write-Off
  5. Year-Over-Year (YOY)
  6. Zero-Based Budgeting (ZBB)