Instruction followed for writing A Cash Book
When writing a cash book, it's essential to follow certain instructions to ensure accuracy, transparency, and compliance with accounting standards. Here's a step-by-step guide:
Title: Begin by clearly labeling the document as a "Cash Book" at the top of the page.
Date: Each entry in the cash book should be dated to reflect the day the transaction occurred. This helps in tracking transactions over time.
Details: For each transaction, record the details including:
- The date of the transaction.
- Description: Briefly explain the nature of the transaction (e.g., sale of goods, payment of expenses).
- Reference number: If applicable, include any reference numbers associated with the transaction.
- Amount: Record the amount of money involved in the transaction, specifying whether it is a debit (money going out) or credit (money coming in).
Columns: The cash book typically has two columns: one for recording cash receipts (income) and another for recording cash payments (expenditure). Ensure these columns are clearly labeled.
Amount: Record the amount of each transaction in the appropriate column, based on whether it's a receipt or payment.
Running Balance: After each transaction, calculate and record the running balance of cash on hand. For receipts, add the amount to the previous balance; for payments, subtract the amount from the previous balance.
Closing Balance: At the end of each accounting period (e.g., daily, weekly, monthly), calculate the closing balance by adding up all receipts and subtracting all payments from the initial balance or the balance brought forward from the previous period.
Analysis: Optionally, include an analysis section where you categorize transactions into different accounts (e.g., sales, purchases, expenses) for better financial reporting and analysis.
Reconciliation: Regularly reconcile the cash book with bank statements to ensure accuracy and detect any discrepancies.
Signatures: Depending on your organization's policies, the cash book may require signatures of authorized personnel to certify the accuracy of the entries.
Archiving: Store the cash book securely and maintain it for auditing purposes and historical record-keeping.
By following these instructions, you can ensure that your cash book accurately reflects all cash transactions and provides a clear audit trail for financial reporting and analysis.