Record each cash payment on the day you receive it as one income entry with the date, customer, amount and what it was for, give the customer a numbered receipt and keep a copy, then deposit the cash so your bank statement backs up your books. IRS Publication 583 (December 2024) lists receipt books, bank deposit slips and cash register tapes as records of gross receipts. In a ProfitDrawer bookkeeping spreadsheet, a cash sale is an Income row with Paid? set to Yes.
Steps that keep cash traceable:
- Write a receipt from a numbered receipt book, or send a digital receipt, and keep your copy.
- Log it the same day: date, customer, invoice or receipt number, category and amount.
- Deposit it whole. Bank the full amount before spending any of it, so deposits match your income records. If you keep some as cash on hand, note it.
- Match monthly. Compare cash recorded with cash deposited.
Cash is taxable income like any other payment, whether or not a form is issued.
Large cash payments: a business that receives more than $10,000 in cash in one transaction, or in related transactions (payments within 24 hours count as related), generally must file IRS Form 8300 within 15 days and give the payer a written statement by January 31 of the following year.
Tips received in cash are income too and should be logged the same way.
General information, not tax advice.
Source: IRS Publication 583: Starting a Business and Keeping Records · Updated
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General information, not tax, legal or financial advice. Check the rules for your state and your situation.