What should I know about cash and reconciliations?

Accountants frequently use the term 'cash' to cover both bank accounts and physical cash, namely notes and coins, and, as you will probably know, in most businesses the bank accounts have much the greater significance. The first part of this chapter deals with the bookkeeping implications of cash, and, of course, the cash book is one of the books of prime entry. It is important and the great significance of cash is made clear in later chapters. For the same reason the bank reconciliation, which is also covered in this chapter, should on no account be neglected.

Running short of working capital and cash can be very damaging to a business, or even fatal. Perhaps surprisingly, it is not uncommon for a failed business to be making profits at the time of the failure. The proper and timely maintenance of the bookkeeping records can be of great assistance in preventing this, and it is of course sound practice for other reasons too. The topics covered in this chapter are:

• The cash book.
• Petty cash.
• The bank reconciliation.
• Other reconciliations.