Importance of cash book
Importance of cash book is discussed below:
When cash book is maintained, it is not necessary to open a separate cash account in the ledger. Thus, cash book serves the purpose of a journal and a ledger.
When cash transactions are recorded through journal entries, a lot of time and labour will be involved. To avoid this, all cash transactions are straightaway recorded in the cash book, which saves time and labour.
It helps to know the cash and bank balance at any point of time by comparing the total cash receipts and cash payments.
As cash book is a separate subsidiary book, an independent person can maintain it. Hence, business can get the benefit of division of labour.
Cash book provides all information regarding total receipts and payments of the business concern during a particular period. It helps in formulating effective policy for cash management.
Balance as per cash book and the balance in the cash box can be compared daily. If there is any deficit or surplus, it can be found easily. It helps in preventing any fraud or error in cash dealings.