Decide the level of detail you want to use in recording your cash-flow data. If you want to track only cash received and cash expenditures, you will need a date column, a description column, two cash movement columns and a column for a running balance. If you want to classify your cash received and expenditures, you will need more columns in your ledger.

Generally, you will want to have at least two classification columns for cash received and several columns for classifications of expenses. One of the purposes of any bookkeeping function is to clearly show the flow of cash for specific periods of time. Additional classifications will present a clearer picture of cash flow. Set up your first cash column for all cash received and your second for expenses.

Put a heading at the top of each column identifying it.

Make an entry in one of the columns for every cash transaction. If you want to gather additional information about cash flow, you will also enter the same number in an income or expense classification column to the right that you set up with a specific expenditure heading. Set up your income classification columns. One column should be given a heading for cash from income earned or sales. A second column should be set up with a heading for cash from any other sources such as cash deposits from loan proceeds or savings. You can also have a miscellaneous income column for any income that you do not need to track in a specific column. You can set up several columns for cash depending on how much detail you want or need in your information.

Set up your expense classification columns.

Put a heading at the top of each column for the type of expenses you want to track. Examples are supplies, utilities, office expenses, insurance expenses, etc. You should also have a miscellaneous expense column for any expense that does not need to be tracked in a specific column. Set up a balance column in the last column on the right with a running balance or current balance heading.

Post the first entry.

It should be a cash on hand total in the running balance column. All entries that are negative should be shown with a minus sign or in parentheses here and throughout the ledger.

Begin posting your transactions.

Put the date of the transaction in the date column, put a short description in the description column such as deposit or the payee you have written a check to that you are now posting. Post the amount of the transaction in the appropriate column which designates it as an income or expense item. Post the same amount in the classification column to the right that applies such as the type of income that the deposit was comprised of or the type of expense that was paid, utilities, office expense, etc. Some deposits or payments may have to be split into several different columns such as a deposit made up of business sales and funds from savings. Calculate the running balance across as you post each transaction by adding the income to the previous balance and subtracting the expenses on each line for each transaction.

Calculate the totals for a specific time period such as a week or a month by totaling all the columns.

The total of the opening balance plus the income column minus the expense column should equal the current running balance. The totals of all the classification columns, income columns minus expense columns added to the opening balance should also equal the current running balance.

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