A check register, also known as a cash disbursement journal, is where you record all your business’s check and cash transactions during an accounting period. Businesses use check registers to calculate the current balance of their checking accounts.
Depending on your business’s needs and preferences, you might have a separate check register for each checking account (e.g., payroll check register and operating account check register).
Cash disbursement journals usually have columns that help you organize and analyze transaction information. Typically, a check register includes the following sections:
- Transaction date
- Check number or category (e.g., utility bill)
- Description or memo
- Debits and credits associated with the transaction
- Account balance
A check register is a crucial part of your accounting process. This register indicates what types of purchases your business makes and can help you adjust spending if needed.
Unlike online banking statements, check registers give you a real-time record of your bank account balance and how much money you have available to spend.
There are many benefits to using a check register at your small business. It can help you:
- Avoid overspending
- Budget better
- Keep your transactions organized and up-to-date
- See your accurate balance
- Track how much money you’re spending
- Find errors (e.g., a missing check)
- Reconcile bank statements
As a business owner, you need to know how to complete a check register. Record transactions in your check register before recording your business transactions in the general ledger.
Update your check register each time you spend cash or write a check to ensure you have an accurate balance.
When filling out a check register, you must know all the details of the transaction, including information such as the transaction amount, the transaction date, and the purpose of the transaction.
A credit (deposit) increases your cash disbursement journal while a debit (payment) decreases it.
Here’s an example of what one of your business’s check registers might look like:
| Date | Description | Check Number | Debit | Credit | Balance |
|---|---|---|---|---|---|
| 8/1/2020 | $5,000 | $5,000 | |||
| 8/7/2020 | Office Expenses | 123 | $200 | $4,800 | |
| 8/20/2020 | Utility Bill | $150 | $4,650 | ||
| 8/25/2020 | Cash Deposit | $500 | $5,150 | ||
| 8/28/2020 | Sales Income | $250 | $5,400 | ||
| 8/31/2020 | Supplies Purchase | 124 | $100 | $5,300 |
As you can see, you begin the month with a $5,000 balance. After accounting for income and expenses in your check register, you have $5,300 at the end of the month. Assuming you have a monthly accounting period, the $5,300 balance would become your beginning balance at the start of the next month.
As a business owner, you have a few options when recording transactions in your check register. You can:
- Record your transactions manually on paper
- Use a spreadsheet
- Use accounting software
Creating a check register manually with pencil and paper is a good option if you want to save money. However, it can be time-consuming and prone to errors.
A spreadsheet is a step up from a manual check register. It still requires you to input numbers yourself. However, depending on your spreadsheet type, you might be able to set up formulas to do balance calculations for you (e.g., beginning, current, and ending balances).
Basic accounting software can help streamline the transactions in your check register. The software can help you keep your current balance updated and provide you with a snapshot of your transactions during the period. Depending on the software, you might even be able to do things like sort the register by a certain date or attach files to the transaction (e.g., a copy of the receipt). Although more costly than other options, accounting software can help you avoid check register mistakes and save time.
To keep your check register organized, consider opening a business checking account. A business bank account allows you to keep business transactions separate from personal expenses. Combining personal and business transactions can cause issues with tax filing, financial reporting, and budgeting.
