To effectively run their businesses, small business owners must track their sales, expenses, receivables, payables and assets. Many businesses utilize accounting software applications. Others with fewer transactions to track use paper tools, namely a ledger and a cashbook. A ledger enables an owner or her bookkeeper to maintain accurate records of debits and credits that affect the income statement and balance sheet. A cashbook tracks cash receipts and, through reconciliation, acts as an internal audit tool.


A general ledger is a physical book containing graph-like paper structured to allow easy recording of accounting transactions. Historically, bookkeepers and accountants used this ledger to record and categorize income statement and balance sheet transactions. Some companies still use these books. Others use software that includes general ledger accounts, which serve the same purpose. Bookkeepers use subsidiary ledgers to record and track control accounts. Details about specific accounts are recorded in the subsidiary ledger. These accounts, called control accounts, then appear in the general ledger as summaries.

General Ledger

General ledger users maintain separate pages in a physical book or separate accounts in software for each category or subcategory shown on the financial statements. These categories include the balance sheet items accounts receivable and inventory, which appear under short-term assets, and the long-term asset accounts of equipment and land. General ledger accounts include accounts and notes payable, which are short-term liabilities found on the balance sheet. Income statement accounts that appear in the general ledger include salaries and wages, marketing expense and maintenance.


A cashbook is a journal that documents cash inflows and outflows. Bookkeepers and accountants record all cash received -- including cash, checks and money orders -- and all cash paid out. Cash payments and receipts are recorded in order of transaction date and include bank deposits and withdrawals. Because the cashbook closely or precisely matches a company's bank accounts -- less cash kept in a cash drawer -- accounting systems or procedures that use cashbooks reconcile the book with applicable bank statements. The user then posts the cashbook summary to the general ledger.

Multiple Cashbooks

At larger companies, accounting teams may use two separate cashbooks to facilitate ease of tracking. These companies use one journal to record all cash receipts and their purpose -- for example, cash sale or sale of equipment. They use the other journal to record all cash payments -- for example, cash purchases or administrative expenses. As with one cashbook that documents both sets of transactions, the user transfers the transactions from both books to the general ledger.