What is the difference between a cash book and a bank statement?

• A. The cash book records cash receipts only; the bank statement records all bank charges.
• B. The cash book records cash and bank transactions; the bank statement is a record provided by the bank of the account.
• C. The cash book is the bank statement; the bank statement is internal.
• D. The cash book records bank transfers; the bank statement records cash alone.

Answer: (B)

A cash book is the business’s own record that tracks every cash movement—both cash on hand and cash at bank—capturing receipts and payments as they happen. A bank statement, on the other hand, comes from the bank and lists all activity in the bank account for a period, including deposits, withdrawals, charges, and the ending balance.

The correct idea is that the cash book records cash and bank transactions internally, while the bank statement is an external record provided by the bank. For example, when you receive cash or pay by cheque, you record it in the cash book; the bank statement will reflect those transactions as processed by the bank and show the bank’s balance.