What is a Cash Receipts Journal? Definition Meaning Example

When a retailer sells merchandise to a customer and it collects cash, this transaction is recorded in the cash receipts journal. The cash receipts journal can be subdivided into different sections as well. For example, many companies want to know and evaluate the amount of cash they collected from sales, credit customers, and other sources. A cash receipt in accounting serves as backup documentation for cash transactions recorded in cash receipt and payment journals.

Cash payments are payments made by the firm using cash in the form of currency as payment. All additional cash sources, including bank interest, investment maturities, sales of non-inventory assets, sales of fixed assets, etc. After making credit sales to the consumer based on the advanced credit period, any money is subsequently collected. Although these amounts are often posted at the end of the month, they could be posted more frequently.

As they are posted, the account numbers are placed in the post reference column. This ensures that the individual customers’ accounts are up to date and accurately reflect the balance owed at that date. My Accounting Course  is a world-class educational resource developed by experts to simplify accounting, finance, & investment analysis topics, so students and professionals can learn and propel their careers. Depending on how frequently you get cash from customers, there can be a lot of entries in this journal. We follow strict ethical journalism practices, which includes presenting unbiased information and citing reliable, attributed resources. Our mission is to empower readers with the most factual and reliable financial information possible to help them make informed decisions for their individual needs.

Credit sales are handled using the accrual basis of accounting, while cash transactions are handled using the cash basis. All cash receipts for a given accounting period are recorded in the cash receipts journal, a special kind of accounting journal. Cash receipts, on the other hand, serve as documentation of a cash sale from the cash received for your company. All cash transactions made during an accounting period are documented in a cash receipts journal, which is set up as a subsidiary of the general ledger. Chronological entries are made in the cash receipts journal and the balance is continuously updated and confirmed. Any entries in the accounts receivable column should be posted to the subsidiary accounts receivable ledger on a daily basis.

Cash Receipts Journal: Definition, Types, Pros & Cons

A cash receipts journal is a special journal used to record cash received by a business from any source. Whenever a company receives cash for any reason, the journal entry is recorded in the cash receipts journal. Credit sales and sales made on account are not usually recorded in this journal because there isn’t any cash collected in these transactions. This way an accountant or bookkeeper can analyze the amount of cash collected and recorded during a period separate from all other journal entries in the general journal. You calculate your cash receipts journal by totalling up your cash receipts from your accounts receivable account.

If a company receives a $236 cash payment for a customer account, the accounting transaction is reported in the cash receipts journal with a $236 debit posting to cash and a $236 credit posting to accounts receivable. Since, when cash is received, the cash account must be debited to reflect the increase, a credit must be posted to the appropriate account to keep the transaction balanced. Any sales, accounts receivable, or inventory may be impacted by a cash receipt. On the other side of the ledger, a cash payment journal keeps a record of all payments made with cash by the company.

This must be specified because, in accounting, cash can also mean any highly liquid asset that includes accounts receivables, money orders, checks, cash equivalents like US treasury bills, money market funds, and commercial paper. Transactions with any other type of liquid asset are not recorded in the cash receipts journal. A common error made when posting entries from a cash receipts journal is to forget to post the individual amounts in the accounts receivable column to the subsidiary ledger accounts receivable. This can cause the customer’s account to be inaccurate and may result in the customer being overcharged or undercharged. A cash receipts journal is a record of financial transactions that includes bank deposits and withdrawals as well as all cash payments and receipts. The general ledger account is then updated with the cash receipts journal entries.

What are Cash Receipts Journals?

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The credit columns in a cash receipts journal will most often include both accounts receivable and sales. Again, other columns can be used depending on the type of routine transactions that the firm engages in. As these accounts are posted, the account number is entered into the post reference column.

Format/Specimen of Cash Receipts Journal

If someone needs to investigate a specific cash receipt, they might begin at the general ledger and then move down to the cash receipts journal, from which they might obtain a reference to the specific receipt. In our example, the only other credit column featured in the cash receipts journal is for all other accounts. It is set up in the same way that the other column on the debit side is, except that the account title area is replaced by a “Ref.” column. The main objective of a cash receipts journal is to properly manage cash by making it simple to ascertain cash balances at any given time, enabling managers and corporate accountants to budget their cash. Depending on a company’s requirements, different formats are used for a cash receipts journal. To help you understand the recording procedure, a simple format is given below.

• Whenever a company receives cash for any reason, the journal entry is recorded in the cash receipts journal.
• If a company receives a $236 cash payment for a customer account, the accounting transaction is reported in the cash receipts journal with a $236 debit posting to cash and a $236 credit posting to accounts receivable.
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• The cash receipts journal can be subdivided into different sections as well.

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In addition, the post reference “cr” is recorded to indicate that these entries came from the cash receipts journal. The cash receipts journal is used to record all transactions that result in the receipt of cash. Again, in the general ledger accounts, the post reference “CR-8” is recorded to indicate that these entries came from page 8 of the cash receipts journal. At the end of the month, the different columns in the cash receipts journal are totaled. The totals from all the amount columns (other than the other account column) are posted to the appropriate general ledger accounts.

How Do You Calculate Cash Receipts Journal?

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In the subsidiary ledger, the post reference is “CR-8”, which indicates that the entries came from page 8 of the cash receipts journal. The debit columns in a cash receipts journal will always include a cash column and, most likely, a sales discount column. Other debit columns may be used if the firm routinely engages in a particular transaction.

When a company receives a loan from a bank, a transaction is performed in the cash sales collections journal to record the loan. The cash receipts journal ignores the accrual basis of accounting, which serves as the foundation for sound accounting and double-entry bookkeeping. The cash receipts diary also contains information on any additional loans that a person has taken out from banks or other financial institutions. Tax refunds for direct and indirect taxes, any fee or commission collected, or the maturity of an investment or insurance policy. The cash receipts journal is used to track transactions where a shop or wholesaler sells products to a customer and receives payment in cash.

What is a cash receipts journal?

The cash receipts journal records all debit transactions to cash, whereas the cash payments journal records all credit transactions to cash. A cash payment journal is a record of all transactions a firm pays in cash. It differs from a cash receipts journal in that a cash payment journal operates on the other side of the ledger. A cash receipts journal records all transactions that increase cash for a firm. For the cash receipts journal, cash transactions include only those made with currency and coins.

As the example shows, a typical cash receipts journal consists of many columns. This is necessary because there are numerous transactions that lead to the receipt of cash. As an accounting entry that records the receipt of money from a customer, a cash sales receipt is a debit. Additionally, accessing monetary information through a cash receipts journal is far quicker than tracking the cash payment through a ledger. And that is that it only takes into consideration the cash basis of accounting. The balance in the journal is regularly summarized into an aggregate amount and posted to the general ledger.

The cash disbursement diary and the cash receipts journal are typically divided. In contrast to a cash account, which is an account within a general ledger, a cash receipts journal is a separate ledger. The total from each column in a cash receipts journal is posted to the appropriate general ledger account.