Day book, cash book, bank book: which is which
| Book | What it records | The question it answers |
|---|---|---|
| Day book | Every transaction of the day, in order, whatever the method | What happened today? |
| Cash book | Only cash in and out, with a running balance | How much cash should there be? |
| Bank book | Money through the bank: UPI, card settlements, transfers, cheques | What should the bank statement show? |
| Ledger or khata | A running account per customer or supplier | Who owes whom, and how much? |
For a small business the day book can do the first three jobs at once — if every line carries its method. That single column is what lets the cash total and the bank total fall out of the same page.
The columns
| Column | Example |
|---|---|
| Time | 13:42 |
| What | Bill 1045 · Milk from Sharma Dairy · Advance to Ravi |
| In or out | In |
| Method | Cash, UPI, card, bank transfer, company account, app payout, khata |
| Amount | ₹1,240 |
| Reference | The bill number, the UPI reference, the voucher number |
| Who | The person who took or paid it |
Why every method gets its own line
- Cash is the only money you can count tonight.
- UPI lands in the bank, not in the drawer. Check it against the bank app or the payment soundbox, never against the drawer.
- Card payments reach the bank later, usually less the bank’s fee, so the card total and the bank credit rarely match to the rupee.
- A company account — credit to a business customer, a hotel’s city ledger — is a sale today and money on another day.
- Delivery-app payouts arrive later, after the platform’s commission and deductions, and are never cash.
- Khata or udhar is a sale with no money yet. It belongs in the customer’s account, not in the drawer total.
Mix any of these into “cash” and the drawer will look short or over by exactly that amount — and somebody gets blamed for a difference that is only a bookkeeping one.
Keep it on the business date
A restaurant that shuts at 1 am, or a hotel with a night desk, should keep the day book on its business date, not the calendar: a bill at 00:30 belongs to the evening that took it. Decide the cut-off once — for example 4 am — and keep to it, or every late night splits its money across two pages.
Closing the day
- Stop billing for the day, or note the time the page was closed.
- Count the cash by denomination and write the count down.
- Expected cash = opening float + cash in − cash out (expenses, refunds, advances, cash taken to the bank).
- Compare the count with the expected cash. Write the difference and, if you know it, the reason.
- Check the UPI total against the bank app, and the card total against the terminal’s settlement slip.
- Leave tomorrow’s float in the drawer; bank or lock away the rest, and record it as money moved, not money spent.
- Sign the page. Somebody else initials it the next morning.
A worked example
| Sales today, by method | Amount | In the drawer tonight? |
|---|---|---|
| Cash | ₹18,450 | Yes |
| UPI | ₹24,300 | No |
| Card | ₹6,200 | No |
| Company account (billed, paid later) | ₹4,500 | No |
| Khata (udhar) | ₹1,150 | No |
| Total sales | ₹54,600 |
| Cash paid out today | Amount |
|---|---|
| Milk — Sharma Dairy | ₹1,240 |
| Vegetables | ₹1,410 |
| Auto fare, supplies run | ₹150 |
| Advance to Ravi (comes back off his salary) | ₹1,000 |
| Total cash out | ₹3,800 |
The drawer
Opening float₹2,000
+ Cash sales₹18,450
− Cash paid out₹3,800
Expected in the drawer₹16,650
Counted₹16,600
Differenceshort by ₹50
Of ₹54,600 of sales, only ₹18,450 is in the drawer tonight. UPI and card are for the bank to confirm; the company account and the khata are money still to come. And the advance to Ravi is not an expense — it comes back off his salary.
Expenses: on the day, with a bill
- Write every expense the day it happens: what, how much, how it was paid, and the bill or voucher number.
- Put each in a category — stock, salary, rent, utilities, fuel, maintenance — so the month can be compared with the last.
- A delivery taken on credit is a supplier bill, not an expense paid; the payment later is the money going out.
- An advance to staff is money out, not a salary expense: it comes back off a payslip.
- The owner’s personal spending from the drawer is drawings, not a business expense. Write it down as such.
Three income-tax rules that make the record matter
The Income-tax Act, 2025 replaced the 1961 Act from 1 April 2026 and carried forward three rules that a day book with a method on every line helps you keep:
- Receiving cash. No person may receive ₹2,00,000 or more in cash from one person in a day, for a single transaction, or for transactions relating to one event or occasion (section 186; it was section 269ST). The penalty is a sum equal to the amount received (section 451). A wedding order or a banquet paid in cash is where this bites.
- Paying cash. When payments to one person in a day add up to more than ₹10,000 and are not made through a bank or a specified online mode, the expense is not allowed as a deduction (section 36(4); ₹35,000 for hiring goods carriages; it was section 40A(3)). Pay suppliers by UPI or bank above that line.
- Keeping books. A business must keep books of account if its business income exceeds ₹1,20,000 or its turnover exceeds ₹10 lakh in any of the three preceding years — ₹2,50,000 and ₹25 lakh for an individual or HUF (section 62; it was section 44AA). A day book is the daily part of those books.
The weekly and monthly look
- Cash differences by person and by day of the week — a pattern is a question, a one-off usually is not.
- UPI and card totals against the bank statement.
- Company accounts and khata balances by age.
- Delivery-app payouts matched to the orders they pay for.
- Expenses by category against last month.