What is a cash book and what does it record?

• A. A cash book records only cash receipts.
• B. A cash book records only cash payments.
• C. A cash book records all cash receipts and payments, and also serves as the main record of bank transactions.
• D. A cash book is a separate bank statement.

Answer: (C)

A cash book is a diary of all money coming in and going out. It records every cash receipt (money received by the business) and every cash payment (money paid out). In many systems, it also includes a bank column to track transactions through the bank, so it becomes the main record of bank transactions as well. This combined record lets you see the cash and bank position at any time and provides the source for posting totals to the general ledger. It’s not limited to just receipts or just payments, and it isn’t a bank statement—that is an external document from the bank, while the cash book is the business’s own internal record.