Keeping a simple cashbook print Print

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A cashbook can be regarded as the basic building block of a business accounting system. Learning how to keep a simple manual cashbook is within everyone’s grasp. This guide explains how you can set up and maintain a simple manual cashbook, and the benefits you gain from a cashbook, such as analyzing your income and expenditure and working out your GST returns.

There are many types of cashbook systems that you can use - manual and electronic. The most important feature to look for is a system that is easy to use, easy for you to see at a glance what is happening, and does not take up too much of your time.

The manual cashbook example explained here is a guide only, and shows just a few entries, but understanding its operation will give you a basic grasp of how all cashbooks operate. Even if you later move on to a computerised cashbook, this basic understanding will stand you in good stead.

Click here to see an example of a cashbook.

As you read through this guide, have the cashbook example (printed in landscape, not in portrait like this article) in front of you. Our cashbook features a running bank balance and a business record in one.

Some businesses have three cashbooks (cash payments, cash receipts and bank balance); however you may find it easier to use this system (you can tailor it to suit your particular business).

The cashbook is divided into three parts:

  • Columns 1-6: show details of what has happened in the business, and provide an up-to-date bank balance.
  • Columns 7-8: show the money that has come in.
  • Columns 9-17: analyse the money that has gone out of the business.

The important principle is that you enter all money figures TWICE - once in columns 4 OR 5, as money IN or OUT of the business, and again in one of the analysis columns (7-8 or 9-17), showing what that money was spent on.

The cashbook explained

Column 1

Simply records the date the transactions took place. Remember that you only enter something in the cashbook if cash has actually changed hands. For example, if you complete a job for a client, and you invoice them for $1,000, this is entered in the cashbook only when the money comes in and is banked.

Column 2

Details where the cash came from (Sales, Interest, etc.) or what you're paying it out for (Stationery, Petty Cash, etc.). In the case of an expense, you could write Stationery or be more specific about the payee (such as 'Whitcoulls'). The same applies to income. You can write in the name of the people you did business with if you want to. If you are a retailer, sales will be the total of the previous day's takings, whereas a builder will probably enter the name of each individual job as sales.

Column 3

Each time you pay out a cheque, write the cheque number here as a cross reference, and to help you check your bank statements where cheque numbers are also recorded.

Column 4

Records any money coming into the business.

Column 5

Use this for any money going out of the business (a cheque should always be written for outgoing money).

Column 6

Keeps a running balance for you, so you know exactly how much money you have available. If you ring up the bank to hear the recorded balance of your account, remember that this may not be the correct balance as you may have written cheques that have not yet been cashed.

Column 7

Analyses your sales. You can use several sales columns to further analyse sales, for example: cash sales, invoice sales. You might prefer to analyse sales by product type so you can easily see which type of business is best. For example, a hairdresser could analyse sales in terms of cuts, perms, colouring and 'other'. These could be further split into men and women. At the end of the month you will be able to work out what percentage of your business comes from men or women clients, and what type of service they wanted. All vital information for your marketing strategy.

Column 8

Sometimes money comes in that is not sales, and so will not be taxable (for example, when you inject personal money into the business, or GST refunds, etc.). Of course you're not restricted to two sales columns. Add more if you need them.

Column 9

Use if you buy stock, materials, etc.

Column 10

Any vehicle expenses like petrol, insurance, registration are recorded here.

Column 11

For rent, if you have a lease.

Column 12

Advertising, business cards, and brochure expenses noted here.

Column 13

All stationery and office expenses go in this column.

Column 14

Coffee supplies, any bits and pieces that do not fit into the rest.

Column 15

Large expenses; tax bills, GST payments etc.

Column 16

Any capital expenses (or fixed assets) like machinery, cash registers, computers etc.

Column 17

Any money that you draw out for yourself.

Adapt the cashbook to suit

Note that you may wish to have columns for telephone, postage, power, etc. You can buy a multi-column cashbook to suit your purposes from most stationers. A cashbook is something you personalise for your own convenience, and is for your use.

Accountants do not need a cashbook to do your accounts (but it does help them find things). They rely in the first instance on bank statements, cheque butts and invoices. So a cashbook provides a neat and simple way for you to analyse what is happening in your business. It gives you 'hands on' control.

Analysing the cashbook example

Let's look at the example in more detail:

March 1st

The bank balance from the previous month has been brought forward. Sales of $200 received and banked are recorded. Also a cheque drawn for petty cash of $100 (for small stationery needs, milk, tea, etc).

March 2nd

Sales of $800 banked, paid rent with cheque number 20 of $420, stationery $160 and petrol $40. Placed an advert in the newspaper for $200, and had to pay immediately.

This cycle continues until the end of the month, and then all amounts are totalled and checked for errors. For example, we started with $1,620 and had sales of $1,000, giving us a total $2,620, but $920 went out on expenses, leaving us with $1,700 in the bank.

You must also, of course, add in any bank fees or other charges, like automatic outgoing payments, credit card costs or direct payments from customers once the bank statement comes in. Or you can check your bank account regularly via the Internet and add these amounts into the cashbook as they appear in your statement.

There are many ways to construct a cashbook, but this simple system is one that you may wish to adopt, as it certainly saves time, and you can analyse what has happened in your business at a glance. The more you know about the money side of your business, the better placed you are to make wise decisions.

Cashbooks are really quite straightforward to operate. One tip that saves time and stress is to write up your cashbook at least every few days, if not daily. This is much easier than trying to complete a whole month at once.

GST and Bank Reconciliation

Next we'll consider:

  • How to calculate GST from the cashbook
  • How to do the bank reconciliation.

Working out GST (if you are registered)

Many people, when writing up their cashbook, separate GST from all their sales and expenses as they go, so at the end of the month they have a total of all GST owed, and all GST claimable (the difference between the two is what they actually pay).

But there's a simpler solution. Why separate GST out of sales? All your sales will have GST in them (unless you have exempt sales like exports or financial charges). So save yourself time and don't work out the GST in every sale or job. Simply add up your total sales at the end of the month and multiply this total by 3/23 (as long as GST stays at 15%). This will give you the GST owing. (So, in the example from our cashbook, sales totalled $1,000 multiplied by 3/23 = $130.43 GST owing).

Now the expenses. Some people again separate out GST from every single transaction, except the exempt entries (such as bank charges, your own drawings, and employee wages). But you will always have more expenses that include GST than exclude it. So save yourself time by not multiplying every expense by 3/23. Instead, at the end of the month simply add up all the expenses that have GST in them (again excluding the expenses that are exempt). If you like, when you enter expenses that are exempt of GST, put a small cross beside the amount in the end of the month total.

This method means you don't have to spend time during the month multiplying totals by 3/23, adding up columns, etc. Just do it once at the end of the month! So in our example expenses total $920 (40 + 420 + 200 + 160 + 100). Note that if any of these had been GST-exempt expenses like bank charges, we would not have included them at all.

The expenses total of $920 multiplied by 3/23 equals $119.99. So we owe $130.43 for sales, but can claim back $119.99 from expenses, meaning we pay $10.44 to Inland Revenue.


How to complete a bank reconciliation

The purpose of the bank reconciliation is to make sure that your cashbook agrees with your bank statement. In doing the reconciliation you will find out if people or businesses have actually cashed your cheques yet, and add in other payments such as automatic payments, credit card charges, and direct payment credits from customers and end of the month bank charges.

Remember, you know your bank balance from the continuous bank balance column in the cashbook. This now has to be adjusted by a few extra entries. Here's how to go about it:

Step 1: Obtain the bank statement at the end of the month.

Step 2: Check all cheques (numbers and amounts) from the statement against the cashbook and tick both records.

Step 3: Check the deposits from the bank statement against the amounts in the MONEY IN column of the cashbook.

Step 4: If any items are not selected in the debit column of the bank statement these are likely to be bank charges, automatic payments, or credit card charges. Add these amounts into the cashbook.

Step 5: If there are any items not selected in the credit column of the bank statement then you have missed a deposit, and should have entered it in the cashbook. Or you might have received a direct credit from a customer, as many are now choosing to pay this way.

Step 6: Calculate the cash balance according to you. The cash at the end of the month (as far as you are concerned) can be read from the bottom of the cashbook.

However, this will differ from the balance shown on your bank statement. Why? There are two reasons:

  • A number of cheques you have written will not yet have been presented at your bank. List these as un-presented cheques.
  • A receipt from the deposit book may not yet have been credited to your bank account. This will usually be the last deposit of the month that was deposited the following day (in the new month). This is called a deposit not yet credited.

Step 7: Complete the reconciliation as follows:

  • Take the balance on the bank statement.
  • Add: Any deposits not yet credited.
  • Subtract: Any un-presented cheques.
  • The result should equal your cashbook total. If it doesn't, try again.

Congratulations! You've just completed a valuable check of the accuracy of your own records as well as finding out your precise cash position.


Using computerised cashbooks

Accounting software offers significant advantages over manual systems. You can, for example, usually raise invoices, generate instant reports (such as GST reports, profit and loss statements), check your progress against budgets, and have the program report on any unpaid invoices or warn of upcoming bill payments.

There are many accounting software programs on the market, some aimed at small businesses, some capable of more complex functions. Look for programs that have been designed for New Zealand tax and GST compliance.

If the program is anything more than a very basic cashbook package, you will probably need some help in setting up the program to suit your business (the difficult part) and giving you some basic training. Speak to your accountant about what program their practice uses or recommends, and whether it might be suitable for your business. Being able to send your accountant a disk or electronic file to prepare your accounts is both a time and cost saver. Your accountant is also best placed to advise you on setting up an efficient Chart of Accounts (how you adapt the accounting program to suit your business).

Also speak to an ANZ Business Specialist about how your ANZ business transaction accounts can interact with MYOB and Xero.

Further information

To talk to an ANZ Business Specialist:
Call 0800 269 249
Find a local ANZ Business Specialist 

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