Cash Transactions

A typical small business has a variety of different types of cash transactions, which should be recorded in a number of different places:

• Sales and cash receipts journal: to simplify your recordkeeping, we recommend that you combine your sales and cash receipts in a combined journal.
• Daily cash sheet: if a lot of cash moves in and out of your business each day, you should also prepare a daily cash sheet to reconcile your cash received and paid out for the day. If you use a daily cash sheet, you can reconcile your cash receipts with your daily deposit into your bank account.
• A bank reconciliation: a bank reconciliation, at the end of every month, verifies the amount you have in your checking account. It will also help you find bookkeeping errors and could help prevent irregularities such as employee theft.
• A cash disbursements journal: your daily cash disbursements should be recorded here.
• A petty cash fund: if your customers normally pay by check, you may need to set up so that you will have some currency on hand to pay miscellaneous small expenses. A petty cash fund isn't necessary if you use a cash register and always have currency on hand, as long you keep track of these small purchases.