Theory question 101
Cash Book(a) What is a Cash Book?
(b) State seven benefits of keeping accounting records in a business.
(c) List five source documents used in preparing the cash book.
Show the model answer
(a) The cash book is a book of original entry (and also a ledger account) in which all cash and bank receipts are debited and all cash and bank payments are credited.
(b) Any seven: shows profit or loss; shows the financial position (assets and liabilities); shows amounts owed by debtors and to creditors; helps management planning and decision making; provides evidence for tax assessment; helps to detect and prevent fraud; provides information for lenders and investors; allows comparison with past periods and other firms; serves as a permanent record for reference.
(c) Any five: receipts; cheque counterfoils (stubs); paying-in slips; payment vouchers; bank statements; cash sales slips; petty cash vouchers.
Source documents for the cash book are those that show money received or paid.