A record kept by a business or individual to keep track of all cash transactions, including both inflows and outflows, is called a cash book. The thing itself keeps it up. A passbook, on the other hand, is a record given to a customer by a bank to keep track of all their banking activities, including deposits, withdrawals, and interest earned. The consumer updates the passbook by presenting it to the bank for recording transactions, and the bank maintains the passbook. The scope of transactions recorded and who maintains the record is thus the fundamental differences.
These days, all the transactions businesses get into are financed through payment via cash or cheques. Cash books and passbooks are maintained to keep track of such transactions. A business uses a cash book to record and maintain all such cash transactions that the business enters into. This includes cash payments, cash sales and cash purchases. On the other hand, a passbook is a book banks usually offer customers so that all their bank transactions are recorded. Transactions related to withdrawals, deposits and others.
Did you know? Passbooks are also called bank reconciliation statements. It is a record of all the bank transactions the customers enter into.
Differences Between a Cash Book and a Passbook
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Heading |
Passbook |
Cashbook |
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1. Records the transactions |
A passbook records all the transactions in the customer’s bank account. This includes withdrawals, deposits and transfers. As a record maintained by the bank, it reconciles bank activity and record keeping. It serves the purpose of tracking all bank transactions, such as online payments and direct deposits. The bank balance at any point in time can be seen using a passbook. |
It is a record of all the transactions of a business. This includes cash sales, cash expenses and cash purchases. The company mainly uses it for internal record-keeping purposes. A cash book serves as a guide to keep track of the cash flow and cash balance. |
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2. Managing Bank Accounts with Passbook |
A passbook is a vital instrument for managing bank accounts that are either for personal or business purposes. It can ensure all transactions are recorded accurately and monitor bank activity. |
A cash book is a valuable tool used to manage the finance of the business. This is vital for making all financial decision-making processes. |
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3. Banks and Businesses |
The bank maintains a passbook. It can be either in the form of a physical book or in the form of an online account. It can ensure all transactions are recorded accurately and monitor bank activity. |
The business maintains a cash book as a physical book, also known as a ledger. It is used to track all cash payments, such as salaries to employees or payments to suppliers. |
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4. Track the transactions. |
A passbook is primarily used to track the bank transactions of a business, such as withdrawals, direct deposits, interest credited, bank charges, etc. |
A cash book is used to track all the payments that are made towards suppliers or salaries and wages to employees. |
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5. Tracking Finance |
A passbook is a vital document used by financial professionals, such as auditors, and tax authorities, to keep track of the business’s financial health. |
A cash book is an essential document usually used by users such as tax authorities, auditors, and other financial professionals to keep track of the finance of the business. |
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6. Track the Cash flow |
A passbook helps ensure that the business transactions, which involve cheques, have been recorded correctly and can be used in the future to track the cash flow and cash balance. |
A cash book helps in confirming whether the transactions are recorded accurately and can also be used to track the cash balance and cash flow. |
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7. Identifying Errors |
A passbook is a document that assists in identifying any variances or errors in the bank transactions of the business, and this is essential to find areas that need improvement in the banking account management system. |
A cash book is a record that assists in identifying any errors or inconsistencies in the transactions of the business where the payments are made via cash. It can be used to identify areas where there can be scope for improvement in the business's cash management. |
What Is a Cash Book?
A cash book is a financial record maintained by businesses. It records all the cash transactions that the business enters into. Transactions are mostly entered chronologically and sequentially. The cash book is a necessity to prepare the ledger. A cash book is both a principal and a subsidiary book. Cash transactions include cash transactions such as cash payments, cash receipts and cash purchases. Cash payments could be in drawings, payables, purchases, etc. Cash receipts could be in the form of receivables, sales, etc.
Advantages of Cash Book
Here are some of the advantages of maintaining a cash book:
- Cost-Effective: It is a cost-effective way of maintaining a record of the business's cash transactions, as there is no requirement for special software.
- Multi-purpose: It is versatile as the business can record cash transactions related to personal finances, small businesses, etc.
- Audit: It is easier to audit a cash book as it sequentially maintains the cash transactions.
- Easy to track: It is easier to track cash transactions as it allows record keeping efficiently, making tracking and identifying inconsistencies easier.
- Simple: A cash book is the easiest way of recording cash transactions, making it easier for anyone to record such transactions.
Also Read: What is Cash Book in Accounting | Format, Example, Types
Disadvantages of Cash Book
Here are some of the disadvantages of maintaining a cash book:
- Not secure: A cash book is not that secure and is prone to fraud and errors.
- Prone to errors: The cash book can be vulnerable to errors as it is prepared manually.
- No backups: The cash book can risk data loss without automatic backup features.
- Reporting limited: It is challenging to prepare reports such as financial statements with a cash book due to its limited reporting options.
- Non-integration: A cash book cannot be integrated with other systems, such as supply management or sales management.
What Is a Passbook?
A passbook is also known as a bank passbook. It is a record of all bank transactions that occur in the customer's savings account. The bank's book is the customer's account on a book. It records all bank transactions such as withdrawals, deposits, bank charges, interest credited, etc. Banks issue customers passbooks. The customers must retain the passbooks, and they have to update them regularly to enter the transactions that have taken place recently. A customer is up to date with the bank transactions related to his bank with the help of a passbook. The customer can keep track of all the bank transactions related to his account, and if he finds any error or omission, he can check and report the same to the bank.
Advantages of Passbook
Here are some of the advantages of maintaining a passbook:
- Offline mode: A passbook works without the internet as it can also be maintained as a physical copy.
- Up to date: A passbook assists the business in updating information in real-time such as the number of points.
- Security: A higher level of security is involved in passbooks as it uses the users' credentials to open.
- Convenient: A customer can store multiple things, such as coupons, tickets, loyalty cards, etc., all in one single place, making it convenient.
- Online payments: It allows users to make payments online using phones, thus eliminating using physical cards.
Disadvantages of Passbook
Here are some of the disadvantages of maintaining a passbook:
- Non-availability: A passbook is not accessible to everyone, such as users of Apple mobile phones.
- Non-integration: A passbook sometimes cannot be connected to all point-of-sale systems, so it may be difficult to make online payments.
- Non-scalability: A passbook has limited capacity and cannot be used in large organisations that involve multiple businesses across numerous locations.
- Limited personalisation: A passbook offers limited options for customisation that make it less engaging for users.
- Less data storage: The amount of information stored in a passbook is limited as certain necessary details may sometimes not be included.
Also Read: UAN Status, Passbook And Account Balance
Conclusion
A cash book is a financial record of the business, whereas the bank maintains a passbook to record bank transactions. Both cash book and passbook are vital to be maintained by a business as it helps in keeping track of the business's cash balance and cash flow. There are numerous differences between a cash book and a passbook. If there is any difference in amounts, they can be reconciled.
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