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The Importance of a Cash Book in Small Business Accounting

Cashbook is very useful for small businesses like small grocery retail shops, restaurants, bars, and other small business enterprises (SME) that often need small quantities of easily available purchases to avoid unpredictable shortages of products in their shop.

A Cashbook also referred to as cash log is a ledger that is used to keep track of small cash purchases
Big companies like Shoprite, usually don’t use their cash books often because they don’t frequently make small purchases like small business enterprises (SME) does.

Importance of cash book

Cashbook helps businesses to keep track of small cash transactions like, small purchases or cash expenses that could easily get missing. It is very important for every business be it micro, small, medium, or large enterprises to adopt a cash book as a part of their Petty Cash fund.
A petty cash fund is a small amount of cash kept on hand to pay for small purchases or minor expenses such as generator fueling, transport expenses, and reimbursement.
Some micro and small businesses might not accept check or debit card payments. So it is necessary to pay them from petty cash funds when buying from them.

How to Use Cash Book

Here is how to establish a cash book for your small business. You should first open the cash book with the sum of money that you want to use to start your petty cash fund and then add every other cash that you receive either from sales or withdrawal from the bank and then subtract the amount of each cash payment that you made, either purchase, expenses or deposit to the bank, the balance is your petty cash fund or your cash at hand. When you exhaust the amount in your petty cash fund, add more money, and note the amount you have added in your petty cash book. Periodically reconcile the account by making sure that the petty cash fund recorded in the cash book matches the actual cash in hand.

Cash Book Bookkeeping

Your cash book should be a record of legitimate transactions that are made within the business, not personal expenses. You will also need to periodically daily, weekly, or monthly move the record of these transactions to your general ledger. My next post will be about Ledgers.
I will like to know your thoughts about this post in the comment section below.

PS: Petty cash fund should not be large amounts, avoid using petty cash funds to make purchases or expenses or large amounts.

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