Cash is the preeminent asset that an organization -- whether it be a business, government entity, charity or academic institution -- uses to advance its operating agenda, perform tasks and lay the groundwork for success. Corporate management sets sound procedures to monitor financial records, including cash books and general ledgers.
A cash book is a document in which corporate accountants -- and, more principally, bookkeepers and junior accountants -- record all cash transactions. These include money coming in corporate vaults from sources as varied as customers, bank savings accounts and vendors -- through rebate and discount programs, for example. Outgoing cash flows range from vendor and service provider remittances to salary and tax payments. A cash book is similar to a cash journal. In a modern economy in which technology is a staple in corporate accounting, this journal resembles more an electronic repository of liquidity transactions than a physical, classic book.
A liquidity book helps a company’s leadership determine how much money the business has at a given time, be it at the end of a day or week. With this information, senior executives can quell the misgivings that financial commentators might have about the company’s liquidity status and top leadership’s operational skills. For example, the corporation may point to its statement of cash flows to ease the concerns of lenders and ensure the public that it is effectively coping with competitive tedium. Also known as a liquidity report, a cash flow chronicles a company’s operational journey, focusing on money the business spends on operating, investing and financing activities.
How It Works
Cash transactions go through various processes before ending up in a liquidity report. Typically, a bookkeeper records money inflows and outflows by debiting and crediting the cash account. The accounting practice is distinct from the banking usage, and debiting cash means increasing corporate money. For example, the bookkeeper posts customer remittances by debiting the cash account and crediting the customer receivables account. Then, cash entries make it into the trial balance, a report that helps accountants verify that total credits equal total debits. The third step in the financial reporting process leads to the disclosure of cash in a corporate balance sheet, also known as a statement of financial position or statement of financial condition.
In the corporate context, department heads adopt effective cash policies, especially those relating to cash book monitoring, to foster accurate reporting and prevent asset theft. This is important because instances of fraud and cash misappropriation represent a profound betrayal of trust, and segment chiefs know that such events may have regulatory consequences down the road.