How to Maintain Cash Book and Ledger Book in Excel & Tally for Small Businesses

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Maintaining books of account is important for any business, whether big or small. Ledger and cashbook are among the most crucial accounting records as it helps business owners to track expenses, income, cash flow and other financial information of the company. But most business owners fail to maintain these books consistently, just like the new year’s gym resolutions.

The most common reasons why people fail to maintain cashbook and ledger are the lack of time and complex processes. However, now with Excel, Tally, and other bookkeeping apps, you can easily maintain cashbook, ledger and other accounts.

how to Maintain cash book

This blog will provide you with a step-by-step guide on maintaining cash book and ledger in Excel, Tally or even manually.

What is Cash Book, and Why Is it Important?

Cash Book is a record of cash receipts and payments made by a business. It is also known as Cash Transaction Register. The Cash Book is divided into two parts:

  • Cash Inflow: This includes all the cash receipts of the business-like withdrawals from bank, cash sales, and more.
  • Cash Outflow: This includes all the payments made by the business in cash like petty expenses, cash purchases, etc.

You need to maintain a cash book for the following reasons:

  • Keep track of all expenses, payments, and receipts
  • Reconciling the passbook with cashbook
  • Accurate preparation of financial
  • Get an idea of the cash position of the business
  • For easy and effective financial management
  • Manage the cash flow of business

What is Ledger, and Why Is it Important?

Ledger is a book where all the business’ financial transactions related to a particular transaction are recorded. Primary ledgers are Sales, Purchase, and General Ledger. A ledger has all closing and opening and trades of a specific Debtor, Creditor, Asset, or Liability.

Example: You sell goods on credit to a Gopal Dairy, then you need to maintain a Ledger for Gopal Dairy, recording all the sales, receipts, discounts, returns, interest, etc. transactions of Gopal Dairy.

You need to keep ledger for the following reasons:

  • To find out the exact amount payable or receivable from any party
  • To keep track of due dates for payments, returns and receipts
  • Provide the opening and closing balances for financial statement preparation
  • Keep the historical record of all financial transactions
  • Easy to compute GST, income, expenditure, and Profit/ Loss.

How to Maintain Cash Book?

Cashbook needs to be updated regularly for accuracy, and you can maintain it manually in a notebook, Excel or Tally. You can always refer the cashbook to track a specific expense or transaction date. Let’s check how to maintain cash book via different ways.

How to Maintain Cash Book Manually?

This is the simplest way to maintain cashbook. You can keep a diary and record cash receipts and payments daily on the log diary itself.

How to Maintain Cashbook Manually

Here are the steps to maintain Cashbook manually:

  • Keep a separate notebook/ diary as a cash register
  • Use a new page every day and mention the date at the top
  • Now you can record all the cash transactions in the single-column format as shown in the figure
  • Mention the opening cash balance on the left side (Debit Side)
  • Post all the cash withdrawals, sales, and receipts on the left side (Debit) with the date and details
  • Post all the cash expenses, purchases, and deposits on the right side (Credit)
  • At the end of the day, calculate le closing balance, and post it on the left side (Credit)
  • Closing Balance = Opening Balance + All Receipts/withdrawals/incomes – All expenses/ payments/deposits
  • Tally the closing amount of cashbook with current cash in hand at the end of the day.

How to Maintain Cash Book in Excel?

Excel is one of the most popular software for maintaining cashbook and ledgers for small businesses. You can use simple excel templates to maintain your cashbook. Check steps on how to maintain cash book in Excel.

How to Maintain Cashbook in Excel

Follow these simple steps to maintain cashbook in Excel:

  • Open a new Excel file and create two sides (Debit & Credit) with three columns each.
  • Name three columns as Date, Particulars, and Amount on each side as shown in the picture.
  • Now you can start recording all the cash inflows and outflows in respective columns with dates and details.
  • Mention the opening cash balance on the left side (Debit Side)
  • Post all the cash withdrawals, sales, and receipts on the left side (Debit) with the date and details
  • Post all the cash expenses, purchases, and deposits on the right side (Credit)
  • Use an Excel formula to calculate closing balance by totaling the inflows and opening balance and subtracting the cash outflows
  • You can maintain cashbook on Excel daily, weekly, or monthly depending on your needs
  • Match the closing balance with the cash in hand.

Tips for Maintaining Cashbook in Excel

  • Use separate sheets on the same workbook for the different periods: Daily or Monthly
  • You can either make a format or download an Excel cashbook template directly from any website.

How to Maintain Cash Book in Tally?

How to Maintain Cash Book in Tally

Tally is one of the India’s most popular accounting software used by small and big businesses for bookkeeping and accounting.

Steps to Maintain Cashbook in Tally

Maintaining Cashbook in Tally is easy. You need to pass primary entries, and the cashbook is automatically updated.

Here are the steps for passing these entries in Tally:

  • Go to “Gateway of Tally”
  • Select Accounting Voucher

All the entries are passed in Tally through an accounting voucher. You need to give three types of access to maintain Cashbook in Tally.

Payment Entries: To record cash expenses and payments

  • Press F5 in accounting Voucher for Payment Entry
  • Debit the Expense or Party Account
  • Credit Cash Account

Receipt Entries: To record cash receipts and inflows

  • Press F6 in Accounting Voucher Window for Receipt Entry
  • Debit Cash Account
  • Credit the Revenue/income or Party Account

Contra Entry: To record cash deposits and withdraws

  • Press F4 in Accounting Voucher Window for Payment Entry
  • Debit the Bank Account and Credit the Cash account in case of Cash Deposit
  • Credit the Bank Account and Credit the Cash account in case of Cash Withdrawal

To view the Cashbook in Tally:

  • Go to Gateway of Tally
  • Select Display Option or Hit “D
  • Select Account Books
  • Choose Cash Book ledger
  • Press Alt +F2 to choose the date range

How to Maintain Ledger?

Ledger is one of the vital record financial transactions of a business entity. Often, a double-entry bookkeeping system is used to maintain a Ledger.

How to Maintain Ledger Manually?

How to Maintain Ledger book Manually

To maintain ledger manually, you need to create two different registers: Daybook and Ledger Book.

  • Daybook: Daybook is a subsidiary book used to record all the transactions of a business daily. This book does not contain the account heads and their balances.
  • Ledger Book: A ledger book includes the account heads and their balances. All the transaction entries posted in the daybook must be transferred to the ledger on their respective heads.

For Example: If you sell Goods on Credit to Mr A, you need to post it first in your Daybook as Sales made to Mr A. Then, you need to post the amount in two ledgers, Sales Ledger and Mr A ledger.

Steps to Maintain Ledger Manually

  • Use two diary/ notebook/ register: One for Daybook and one for Ledger
  • Divide the ledger book into multiple sections depending on the number of transactions you might need.
  • Post every transaction in daybook first and then post it in the respective ledgers.

Suggested Read: How to Create Ledger in Tally ERP 9 (Tally Prime)

How to Maintain Ledger in Excel?

Even in Excel, you need to create two different types of sheets: A daybook Sheet and Ledger Sheet for Every party or account. You can create multiple sheets for other accounts and parties in a single workbook.

How to Maintain Ledger Book in Excel

Here are the steps to maintain ledger in Excel:

  • Open and create two Excel Workbooks and name them “Ledger” and “Day Book.”
  • Create multiple sheets in the workbook: Each Sheet for each head or account
  • In the daybook sheet, create the following columns: Sr No, Date Debit Amount, Credit Amount as shown in the picture
  • Define the account/ party name for every ledger sheet
  • Name 3 columns like Date, Particulars, Debit amount, Credit amount and Balance as shown in the picture.
  • Enter all the transactions in the daybook sheet and then transfer it to the respective ledger sheet with the date
  • Add a formula to calculate the Balance of each Ledger account. Add all the amounts on Debit side and subtract the total of credit side to find the closing balance.

Note: If the total is on the credit side is larger than the Total of the debit side, post the amount on debit side, else on credit.

How to Maintain Ledger in Tally?

The best part about maintaining a ledger in Tally is that you need to pass only one entry as voucher and Tally will automatically maintain ledgers.

You must create account heads under which all the ledgers will come. For example: if you want to generate a ledger for customers, you can create an account head called “Sundry Debtors” or “Customers.”

Here are the Steps to Maintain Ledger in Tally:

  • Open Tally and go to Gateway of Tally
  • Click on Accounts info from the Display Menu
  • Click on Ledgers and press Enter
  • Click on Create button or Alt + C
  • Enter the name of Head/ Group under which you want to create a new Ledger
  • Pass entries through Accounting Voucher, and it will be automatically posted in the Respective Ledger

Here are the steps to view Ledger in Tally:

  • Go to Gateway of Tally
  • Select Display Option or Hit “D.
  • Select Account Books or Press “A.”
  • Choose the Ledger you want to View
  • Press Alt +F2 to choose a date range

Suggested Read: How to Record Sales & Purchase Entry in Tally with GST

Best Ways to Maintain Cashbook & Ledgers

Typically, there are three ways to maintain Cashbook and Ledger: Manually, In Excel or Tally. However, not every method is fit for every business. Let’s compare the different techniques and find out which is the best way to maintain Cashbook and Ledger for small businesses.

  • Manually

Even the businesses that have implemented accounting systems still use pen and paper to record business transactions in some form or another. Here are some of the advantages and disadvantages of manual bookkeeping.

Pros

  • Very easy and doesn’t require any investment
  • You will get a better understanding of cash inflow and outflow
  • Doesn’t require any expertise, hardware, or software.

Cons

  • Too many chances of calculation and posting mistakes
  • Not suitable for businesses with lots of transactions
  • Time-consuming

Best fit for

  • Shop Keepers
  • Self-Employee
  • Service providers
  • Businesses with less than 20 transactions a day

  • Excel

Excel is undoubtedly the most used software for record-keeping. Even with a comprehensive accounting system, accountants use Excel to keep records and balances. Here are some of the pros and cons of using Excel for maintaining Books of accounts.

Pros

  • Very easy to maintain
  • You can download a readymade template from the internet
  • Calculation mistakes are unlikely
  • Easy to search or find a specific expense
  • Affordable and could be automated to an extent

Cons

  • Need a computer system and excel installed
  • Not suitable for businesses with very few or too many transactions
  • Requires primary computer and Excel Skills
  • Slightly time consuming and Cumbersome

 Fit For

  • Retailers
  • Small business
  • Service Providers
  • Businesses with less than 50 transactions a day

  • Tally

Tally is used to generate bills, manage inventory and keep accounting records of the entire business. Here are some of the advantages and disadvantages of maintaining a cashbook/ ledger with Tally.

Pros

  • Very easy to use and maintain
  • Suitable for businesses with many transactions
  • It can be used for bookkeeping and accounting
  • Very reliable and accurate
  • Easy to search or find a specific expense

Cons

  • Requires basic computer and Tally skills
  • Not suitable for businesses, very few transactions
  • Expensive and impractical for self-employed, freelancers and tiny businesses.

Best Fit for

  • Retailers and Wholesalers
  • Departmental Stores
  • Services and Businesses

  • Billing and Accounting Apps

Billing and Accounting Apps

This is the latest and one of the most efficient ways to maintain Cashbook and Ledger without any expertise or infrastructure. Any business owner can install these bookkeeping apps on their phone to keep books of account free of cost.

Vyapaar, myBillBook, Khatabook, OpenBook, etc., are some popular smartphone billing and accounting apps that allow business owners to maintain Ledger and Cashbook electronically.

Benefits of Using Smartphone apps:

  • Any business, irrespective of its size or type, can use it
  • No need for any accounting or bookkeeping knowledge
  • Free of cost
  • Easy to install and operate
  • Easy Data Backup and remote data access
  • Single point entry for all account updating
  • No calculation error and easy reconciliation

Disbenefits of using Smartphone Apps:

  • Doesn’t provide complete accounting solution
  • Not possible to pass journal entries for final accounts
  • Limited visibility in financial accounts
  • Isn’t compatible for medium and large sized businesses

Tips to Maintain Cashbook and Ledger for New Business Owners

  • Keep your books of account, both Cashbook and Ledger, up to date regularly. This will help you easily track your business performance and identify any discrepancies or incorrect entries.
  • Ensure to cross-check all the transactions before posting them in the Cashbook and Ledger.
  • Do not use Complicated accounting software or tools, which could be time-consuming and rigid.
  • Keep your financial records in a safe place and make back-ups regularly.
  • Reconcile your cashbook and ledger accounts on a monthly/ weekly basis. This will help you identify any discrepancies and take corrective measures.
  • Record or note down cash transactions immediately in the Cashbook. This will help you avoid any confusion or mistakes at a later stage.
  • Periodically review your financial records and take appropriate measures to improve business performance.

FAQ Section

  1. How to maintain Cashbook?

    To maintain a cashbook for a business, business owners need to record all cash inflows and outflows either on a diary, excel or Tally. The Cashbook should be made in a specific format to identify debit and credit transactions quickly.

  2. How to maintain Ledger?

    To maintain a ledger, businesses need to post all the business transactions from the Daybook into a ledger account. Every Ledger of a party or account must show all the transactions of that account and give the final Balance of the account.

  3. What are the benefits of maintaining a cashbook?

    Maintaining a cashbook has many benefits. It helps business owners track their performance, manage their finances, and avoid any discrepancies in their accounts.

  4. How to maintain petty Cashbook?

    Like a cashbook, a petty cashbook can also be maintained to record all the minor cash transactions of a business. Only petty expenses and incomes are noted down in Cashbook like cleaning expenses, tea and coffee expenses, scrape sales, etc.

  5. How to maintain a daily Cashbook?

    To maintain a daily cashbook, business owners need to record all the cash transactions of the day in a diary, excel or Tally. This will help them keep track of all the cash transactions daily.

  6. How to maintain Cashbook in the office?

    To maintain a cash book in the office, you can use excel, Tally, or other specified accounting software.

  7. How to maintain a Cashbook register?

    You can maintain a cashbook register by recording all the cash transactions. All the expenses and payments should be noted down on the credit side, and all the receipts and incomes should be posted in debit.

  8. How do you organize a cash book?

    There are a few things you can do to keep your cashbook organized. 1. Keep your cash book and ledger up to date. 2. Cross-check all the transactions before posting them. 3. Reconcile your cashbook and ledger accounts on a monthly/ weekly basis. 4. Record or note down cash transactions with narration.

  9. What are the types of maintaining cash book?

    According to the number of columns, there are three types of cash book:
    1. Single column cash book
    2. Double column cash book
    3. Triple Column cashbook.

  10. What is cash book format?

    A cash book is a book in which all the cash receipts and disbursements are posted. In general, a cash book is often divided into two parts, namely, the Receipts side and the Payments side or Disbursements side.

  11. Which accounts are maintained in ledger book?

    There are three Major ledger accounts: Sales Ledger, Purchase Ledger, and General Ledger. The general ledger contains all other ledgers of income, expenses, suppliers, customers, etc.

  12. How do you maintain daily cash book in Excel?

    You can maintain a daily cash book in Excel by recording all the cash transactions of the day in a separate excel sheet and match the closing balance with cash in hand at each day.

  13. How do you manually write a ledger book?

    To manually write a ledger book, you need to record all the transactions of a day in a register or notebook in a specified format. You can even use excel to maintain the ledger book manually.

  14. How do you maintain a petty cash book daily?

    To maintain a petty cash book daily, you need to record all the cash transactions in a register or notebook. All the expenses and payments should be noted down on the credit side, and all the receipts and incomes should be posted on the debit side.

  15. What are the needs of maintaining the cash book?

    The needs of maintaining a cash book are:
    1. To keep track of all the cash inflows and outflows.
    2. To keep track of all the payments and receipts.
    3. To prepare financial statements.
    4. To track and prohibit any cash embezzlement. 

  16. Who is responsible for maintaining the cash book?

    Cashbook is either maintained by a business owner or the accountant. However, even office admin or senior staff could maintain a petty cash book.

Related Categories: Accounting Software | GST Software | Expense Management Software | Income Tax Software

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