A cash journal is a bookkeeping tool that is used to record transactions as they happen. Transactions can also be recorded on a daily basis, or even less frequently. The distinguishing feature is that the transactions are taken down in chronological order. In a manner of speaking, a cash journal is the first line of documentation. It can be a hard copy or a soft copy. For the former, any ledger can be used. For the latter, a simple spreadsheet will do the job as well. A cash journal can be used for both personal and business purposes.
For personal purposes, a cash journal is a very useful tool to keep track of one’s budget. This can be implemented by inputting the amount that is set aside for specific expenses and then writing down the actual money spent on each item or activity. For business purposes, transactions - both sales and expenses - are written down in a cash journal.
Normally, there are only several columns in a cash journal. Data such as whether the transaction is cash in or cash out is included. In addition, people/entity involved in the transaction is also noted, as well as the amount and the date of the transaction.
A cash journal is a very effective way of tracking the flow of cash. It is very important that the person responsible for maintaining the cash journal do so diligently. Every single transaction should be taken down. Otherwise, when the time comes for more comprehensive recording or accounting, the data might not be accurate and discrepancies will arise.