The construction of a cash book, largely from bank statements showing receipts and payments of a business during a given period, is often an important feature of incomplete records problems.
Information about cash receipts or payments might be needed to establish:
- The amount of purchases during a period
- The amount of credit sales during a period
Other items of receipts or payments might be relevant to establishing:
- The amount of cash sales
- The amount of certain expenses in the profit and loss account
- The amount of drawings by the business proprietors
It might therefore be helpful, if a business does not keep a cash book day to day, to construct a cash book at the end of an accounting period. A business which typically might not keep a day to day cash book is a shop, where:
- Many sales, if not all sales, are cash sales
- Some payments are made in notes and coins out of the till rather than by payment out of the business bank account by cheque.