Maintaining books of account is important for any business, whether big or small. Ledger and cashbook are among the most crucial accounting records as it helps business owners to track expenses, income, cash flow and other financial information of the company. But most business owners fail to maintain these books consistently, just like the new year’s gym resolutions.
The most common reasons why people fail to maintain cashbook and ledger are the lack of time and complex processes. However, now with Excel, Tally, and other bookkeeping apps, you can easily maintain cashbook, ledger and other accounts.
This blog will provide you with a step-by-step guide on maintaining cash book and ledger in Excel, Tally or even manually.
Cash Book is a record of cash receipts and payments made by a business. It is also known as Cash Transaction Register. The Cash Book is divided into two parts:
You need to maintain a cash book for the following reasons:
Ledger is a book where all the business’ financial transactions related to a particular transaction are recorded. Primary ledgers are Sales, Purchase, and General Ledger. A ledger has all closing and opening and trades of a specific Debtor, Creditor, Asset, or Liability.
Example: You sell goods on credit to a Gopal Dairy, then you need to maintain a Ledger for Gopal Dairy, recording all the sales, receipts, discounts, returns, interest, etc. transactions of Gopal Dairy.
You need to keep ledger for the following reasons:
Cashbook needs to be updated regularly for accuracy, and you can maintain it manually in a notebook, Excel or Tally. You can always refer the cashbook to track a specific expense or transaction date. Let’s check how to maintain cash book via different ways.
This is the simplest way to maintain cashbook. You can keep a diary and record cash receipts and payments daily on the log diary itself.
Here are the steps to maintain Cashbook manually:
Excel is one of the most popular software for maintaining cashbook and ledgers for small businesses. You can use simple excel templates to maintain your cashbook. Check steps on how to maintain cash book in Excel.
Follow these simple steps to maintain cashbook in Excel:
Tally is one of the India’s most popular accounting software used by small and big businesses for bookkeeping and accounting.
Maintaining Cashbook in Tally is easy. You need to pass primary entries, and the cashbook is automatically updated.
Here are the steps for passing these entries in Tally:
All the entries are passed in Tally through an accounting voucher. You need to give three types of access to maintain Cashbook in Tally.
To view the Cashbook in Tally:
Ledger is one of the vital record financial transactions of a business entity. Often, a double-entry bookkeeping system is used to maintain a Ledger.
To maintain ledger manually, you need to create two different registers: Daybook and Ledger Book.
For Example: If you sell Goods on Credit to Mr A, you need to post it first in your Daybook as Sales made to Mr A. Then, you need to post the amount in two ledgers, Sales Ledger and Mr A ledger.
Suggested Read: How to Create Ledger in Tally ERP 9 (Tally Prime)
Even in Excel, you need to create two different types of sheets: A daybook Sheet and Ledger Sheet for Every party or account. You can create multiple sheets for other accounts and parties in a single workbook.
Here are the steps to maintain ledger in Excel:
Note: If the total is on the credit side is larger than the Total of the debit side, post the amount on debit side, else on credit.
The best part about maintaining a ledger in Tally is that you need to pass only one entry as voucher and Tally will automatically maintain ledgers.
You must create account heads under which all the ledgers will come. For example: if you want to generate a ledger for customers, you can create an account head called “Sundry Debtors” or “Customers.”
Here are the Steps to Maintain Ledger in Tally:
Here are the steps to view Ledger in Tally:
Suggested Read: How to Record Sales & Purchase Entry in Tally with GST
Typically, there are three ways to maintain Cashbook and Ledger: Manually, In Excel or Tally. However, not every method is fit for every business. Let’s compare the different techniques and find out which is the best way to maintain Cashbook and Ledger for small businesses.
Even the businesses that have implemented accounting systems still use pen and paper to record business transactions in some form or another. Here are some of the advantages and disadvantages of manual bookkeeping.
Pros
Cons
Best fit for
Excel is undoubtedly the most used software for record-keeping. Even with a comprehensive accounting system, accountants use Excel to keep records and balances. Here are some of the pros and cons of using Excel for maintaining Books of accounts.
Pros
Cons
Fit For
Tally is used to generate bills, manage inventory and keep accounting records of the entire business. Here are some of the advantages and disadvantages of maintaining a cashbook/ ledger with Tally.
Pros
Cons
Best Fit for
This is the latest and one of the most efficient ways to maintain Cashbook and Ledger without any expertise or infrastructure. Any business owner can install these bookkeeping apps on their phone to keep books of account free of cost.
Vyapaar, myBillBook, Khatabook, OpenBook, etc., are some popular smartphone billing and accounting apps that allow business owners to maintain Ledger and Cashbook electronically.
Benefits of Using Smartphone apps:
Disbenefits of using Smartphone Apps:
FAQ Section
To maintain a cashbook for a business, business owners need to record all cash inflows and outflows either on a diary, excel or Tally. The Cashbook should be made in a specific format to identify debit and credit transactions quickly.
To maintain a ledger, businesses need to post all the business transactions from the Daybook into a ledger account. Every Ledger of a party or account must show all the transactions of that account and give the final Balance of the account.
Maintaining a cashbook has many benefits. It helps business owners track their performance, manage their finances, and avoid any discrepancies in their accounts.
Like a cashbook, a petty cashbook can also be maintained to record all the minor cash transactions of a business. Only petty expenses and incomes are noted down in Cashbook like cleaning expenses, tea and coffee expenses, scrape sales, etc.
To maintain a daily cashbook, business owners need to record all the cash transactions of the day in a diary, excel or Tally. This will help them keep track of all the cash transactions daily.
To maintain a cash book in the office, you can use excel, Tally, or other specified accounting software.
You can maintain a cashbook register by recording all the cash transactions. All the expenses and payments should be noted down on the credit side, and all the receipts and incomes should be posted in debit.
There are a few things you can do to keep your cashbook organized. 1. Keep your cash book and ledger up to date. 2. Cross-check all the transactions before posting them. 3. Reconcile your cashbook and ledger accounts on a monthly/ weekly basis. 4. Record or note down cash transactions with narration.
According to the number of columns, there are three types of cash book:
1. Single column cash book
2. Double column cash book
3. Triple Column cashbook.
A cash book is a book in which all the cash receipts and disbursements are posted. In general, a cash book is often divided into two parts, namely, the Receipts side and the Payments side or Disbursements side.
There are three Major ledger accounts: Sales Ledger, Purchase Ledger, and General Ledger. The general ledger contains all other ledgers of income, expenses, suppliers, customers, etc.
You can maintain a daily cash book in Excel by recording all the cash transactions of the day in a separate excel sheet and match the closing balance with cash in hand at each day.
To manually write a ledger book, you need to record all the transactions of a day in a register or notebook in a specified format. You can even use excel to maintain the ledger book manually.
To maintain a petty cash book daily, you need to record all the cash transactions in a register or notebook. All the expenses and payments should be noted down on the credit side, and all the receipts and incomes should be posted on the debit side.
The needs of maintaining a cash book are:
1. To keep track of all the cash inflows and outflows.
2. To keep track of all the payments and receipts.
3. To prepare financial statements.
4. To track and prohibit any cash embezzlement.
Cashbook is either maintained by a business owner or the accountant. However, even office admin or senior staff could maintain a petty cash book.
Related Categories: Accounting Software | GST Software | Expense Management Software | Income Tax Software
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