Maintaining business records is obligatory for anyone carrying on a business. But even if it wasn’t mandatory, it’s an essential element because it enables you to track the performance of your business. Learning how to keep cash accounting records is, therefore, so necessary and a step forward to running a healthy business.
In this blog post, you are going to learn the following essential information:
- What cash accounting records are
- Which businesses use cash basis accounting
- The cash accounting records you MUST maintain
- Practical Examples of cash accounting records
What Are Cash Accounting Records?
There are several types of accounting records a business has to maintain regularly. And we have mentioned all of them in our previous post on business records.
Cash accounting records are one of the categories of the documents a business must keep. What are they? These are documents where you post the cash you receive (revenue) and the money you spend (expenses) as you operate your business. These kinds of transactions happen every day.
Cash accounting is, therefore, a process in which you record the receipts during the period they are received. It’s also a method in which you write down the payments at the time you pay them.
What Is Cash Basis Accounting?
Cash basis accounting simply means that you record income as you receive it and expenses as you pay them. This cash method is the best accounting system for your small business because it enables you to keep your books based on the actual flow of money in and out of your business.
Which Cash Accounting Records Must You Keep?
Income Tax Records
The most essential cash records you must maintain in your small business include the following:
♦ Cash Book
A cash book is a business document where you record money received and paid out of business. In other words, it’s a book used to register receipts and payments in cash. All transactions related to receipt and payment of cash are entered first in the cash book before posting them to their appropriate ledger accounts.
♦ Purchases Record Book
In the purchases record book, you enter daily records of the goods you buy to resell for a profit in your business. If you operate a kind of manufacturing enterprise, you also record purchases of raw materials that you process to produce the products you sell.
♦ Cash Receipts Record Book
In the cash receipts record book, you enter daily transactions related to the cash sale of goods and services in your business. You also record revenue received from other business sources. For instance, if as a business you invest in treasury bills with the government and you receive interest. That interest is income to your business and is also entered in this book. If on the other hand, you inject more capital into the business, that transaction is also reflected in the receipts record book.
♦ Expenses Record Book
Every business spends money on operational costs. These expenses may include and are not limited to rent, electricity, telephone calls, water, transport, salaries, postage, etc. You enter such expenditure in the expenses record book.
Examples of Cash Accounting Records
Benefits of Keeping Records
The four cash accounting records mentioned above are so crucial in any small business. Recording your day-to-day sales, purchases, expenses and other transactions is a must. There are accounting tools, such as QuickBooks, which you can shop around to help you. But because most small businesses may not have the funds to purchase accounting software, we developed easy-to-use accounting instruments. We use them in our business and you will hopefully find them helpful.
To view these accounting tools, click on the BLUE TABS below. They are in PDF format. But if you want the Excel Versions, we can avail them to you on request. Just write to us and we shall immediately send them to you by email. For people who are conversant with Microsoft Excel, you will find it easy to use them because we have also integrated the formulas into them. You will only need to customise them to suit your business needs.
Click on the image below or anywhere within this Tab to download the sample of the Cash Book we developed for small businesses. You can also request for the Excel Version through the contact forms on this website page.
Click on the image below or anywhere within this Tab to download the sample of the Purchases Record Book we developed for small businesses. You can also request for the Excel Version through the contact forms on this website page.
Click on the image below or anywhere within this Tab to download the sample of the Cash Receipts Record Sheet we developed for small businesses. You can also request for the Excel Version through the contact forms on this website page.
Click on the image below or anywhere within this Tab to download the sample of the Expenses Record Sheet we developed for small businesses. You can also request for the Excel Version through the contact forms on this website page.
Maintaining proper cash accounting records is so essential to any small business. Your records should be simple and userfriendly. Feel free to get in touch with us to send you the Excel Version of these simple tools.