Cash journal

What it means

The cash journal is the main book of single-entry bookkeeping. All receipts and payments in cash and through the bank account are recorded in it chronologically and broken down by type, such as membership fees, grants, purchases of materials or services.

Today only certain non-profit bodies may keep single-entry books, such as civic associations, foundations or church organisations, if they meet the statutory conditions. For them the cash journal is the main source of data for the statement of receipts and payments and the statement of assets and liabilities.

For sole traders a similar role is played by the record of income and expenses within tax records. That, however, is not accounting under the Accounting Act but a record kept for tax purposes with its own rules.

How it works in practice

For associations we set up the cash journal so that it tracks cash in hand and money in the bank separately and every entry carries a document number. We split the receipt and payment columns into categories that later flow straight into the annual statements and grant reports.

For receipts from sources with different tax treatment, such as membership fees versus advertising income, we keep separate columns. This makes it easier to determine which receipts are subject to income tax and which are not. Cash movements are also recorded in the cash book.

Besides the cash journal, single-entry bookkeeping requires subsidiary books, for example for receivables, liabilities and assets. At year end we prepare the statements from them and check that the journal balance agrees with the bank and the cash box.

What to watch out for

When a body stops meeting the conditions, for example its receipts exceed the statutory threshold or it starts business activity on a larger scale, it must switch to double-entry bookkeeping. The switch needs preparing in good time, as it requires an opening balance sheet and a different set-up.

The cash journal captures only money movements, not income and expenses as they arise. Unbilled services and unpaid invoices are not in it, so it does not show the true result, and for management purposes the subsidiary books must be looked at too.