The cash book: how to keep it correctly

The cash book looks like the most trivial tool in accounting, and precisely for this reason it is the one that generates the most errors. It records every movement of physical cash: receipts and payments made in coin, not through the bank account. In a business that handles little cash it matters little; in a shop, a restaurant or a retail operation it is the heart of the accounts, and the tax authorities look at it closely. Keeping it badly means a balance that does not add up, and a balance that does not add up is the first sign that something is wrong.

What it records and why

The cash book documents all movements of physical cash: sales taken in coin, small payments made in cash, ATM withdrawals into the till, deposits at the bank. It has nothing to do with “cash” in the sense of the company’s overall liquidity: here we are talking physically about the drawer, the till, the safe.

There is one golden rule: the cash balance can never be negative. You cannot pay out more cash than is physically in the drawer. If the cash book shows a negative balance at any moment, there is necessarily an error or a missing entry. It is the simplest and most powerful plausibility check.

The information in each entry

Every movement must show at least:

Date of the transaction, in chronological order.
Clear description of the reason (over-the-counter sale, purchase of materials, postal costs).
Amount incoming or outgoing.
Running balance after the movement.
Reference to the supporting document (receipt number, voucher, expense note).

The principle of the Code of Obligations is that every transaction must be verifiable from a document: “no entry without a supporting document”. For the cash book this applies strictly, because cash leaves no automatic bank trail.

The cash balance and the controls

The cash book must be kept continuously up to date, not reconstructed at the end of the month. At regular intervals, ideally every day for cash-intensive businesses, a physical count is carried out: coins and banknotes are counted and the total is compared with the balance in the book. The two values must match.

Small differences can happen (wrong change, a typing error) and are recorded as cash shortages or overages in a dedicated account. Recurring or significant differences, on the other hand, are a warning sign: weak procedures, skipped entries or, in the worst case, misappropriation. Documenting the counts with a short signed note is good internal-control practice.

The link with accounting

The cash book does not live in isolation: it flows into the general accounts through the Cash account. The totals of incoming and outgoing movements feed the revenue and cost accounts, and the closing balance of the cash book must correspond to the accounting balance of the Cash account.

For businesses above CHF 500,000 in turnover, required to keep full accounts, the cash book is an integral part of the commercial books and must be kept together with the other documents for ten years. Even smaller operations, subject to simplified accounting (income, expenditure and assets), must document cash movements in an orderly way.

Frequent errors

Recording movements “from memory” at the end of the week, losing supporting documents along the way.
Confusing the physical cash with bank movements, mixing two different registers.
Letting the balance go negative without investigating.
Never carrying out the physical count, so that errors and shortages remain invisible.
Withdrawing cash for private expenses without recording it as an owner’s drawing.

In brief

The cash book records only physical cash movements, in chronological order.
Each line: date, reason, amount, running balance and supporting document.
The balance can never be negative: it is the first correctness test.
Count the cash physically at regular intervals and reconcile any differences.
The book balance must match the Cash account in the accounts.

How we help you

For businesses with cash takings we set up an orderly cash book compliant with the Code of Obligations, with counting and reconciliation procedures that hold up under a tax audit. We put your cash in order.