Cash Book Format

What is a Cash Book?

A cash book records every cash receipt and every cash payment in date order, with receipts on the debit side and payments on the credit side. At the end of the period it is balanced off, and the closing figure should match the notes and coins actually in the drawer. Without one, a shortage cannot be traced to a day or a transaction, and the cash figure in the accounts is only a guess.

Shops, small traders, clubs, schools, housing societies and any business that takes or pays out cash keep a cash book, usually written up daily. Because it serves as both the book of original entry and the cash account itself, there is no separate cash account in the ledger: entries are posted from it to the other accounts. The single-column version suits a business with few bank transactions, or one that keeps those in a separate bank account in the ledger. Commerce students meet it early, since its Dr and Cr layout and ‘To’ and ‘By’ wording carry through the rest of bookkeeping.

The layout is a bookkeeping convention; the duty to keep records comes from tax law, and that differs. In India, check the Income-tax Act's rules on maintaining books of account and the GST law's record-keeping rules, including how long records must be kept. Indian income-tax law also restricts large cash receipts and payments, so check the current limits before relying on cash. In the UK, HMRC sets record-keeping rules; in the US, the IRS; in Canada, the CRA; in Australia, the ATO. Many businesses outside India keep the same record in accounting software rather than a bound book.

A cash book records only cash that actually changes hands. Credit sales and credit purchases do not appear until the money is received or paid; they belong in the sales and purchases books. A single-column cash book says nothing about the bank balance, and even the bank column of a double-column book needs a bank reconciliation to agree with the statement. It does not prove the cash exists — only a count does — and it is not a petty cash book, which is kept separately for small expenses under an imprest amount.

What to put in a Cash Book

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How to write a Cash Book

1. Set the period and opening balance

   Head the book with the name of the business and the period — a day, a week or a month. The first entry on the debit side is the opening cash, written ‘To Balance b/d’, and it must equal both the closing balance of the previous period and the cash counted at the start. If those two figures disagree, sort that out before recording anything new.

2. Enter each receipt on the debit side

   Every receipt goes on the left, in date order, with the date, the particulars, the ledger folio and the amount. The particulars begin with ‘To’ and name the account the money came from: ‘To Sales’ for a cash sale, ‘To Ravi’ for cash received from a debtor named Ravi, ‘To Capital’ for money the owner brings in. Note a receipt or voucher number against each entry.

3. Enter each payment on the credit side

   Every payment goes on the right with the same four columns, and the particulars begin with ‘By’: ‘By Purchases’, ‘By Rent’, ‘By Wages’, or ‘By Drawings’ when the owner takes cash home. Write the bill or voucher number where there is one. A payment with no voucher is the entry an auditor or a partner will question first, and the one nobody can explain later.

4. Check the cash balance never goes negative

   Cash in hand can never fall below zero, because a business cannot pay out notes it does not have. So if payments to date ever exceed opening cash plus receipts, something is wrong: a receipt was not written up, a payment was entered twice, or a payment made from the bank has been recorded as cash. Find it on the day, while the vouchers are still at hand.

5. Balance it off at period end

   Total the debit side and the credit side. Write the difference on the credit side as ‘By Balance c/d’ so that both totals agree, and rule them off. With opening cash of ₹5,000 and receipts of ₹15,000 against payments of ₹14,500, both sides total ₹20,000 and the balance carried down is ₹5,500. Bring it down on the debit side as ‘To Balance b/d’, then count the drawer.

Common mistakes

• Entering a credit sale in the cash book because a bill was issued shows cash that never arrived, so the drawer will always count short of the book.
• Writing a payment on the debit side instead of the credit side overstates the cash balance by twice the amount of the payment.
• Presenting a credit balance in the cash column, which cannot happen with real cash, signals an omitted receipt or a duplicated payment and makes every other figure in the book suspect.
• Carrying the closing balance down on the wrong side, or forgetting to bring it down at all, opens the next period with the wrong figure, and every later balance inherits the error.
• Taking cash from the drawer for personal use without writing ‘By Drawings’ leaves the book showing more cash than exists and understates what the owner has withdrawn.

Frequently asked questions

This page explains general practice and is not legal advice. Requirements differ between countries and, in some cases, between states — check what applies where the document will be used.

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