Cash receipt journal

What is a Cash Receipt Journal? – Definition

Cash receipt journal is a special journal that is used for the purpose of recording cash received by a business from any source. The major sources of cash receipt in a business are as follows:

  • Investment of capital by the proprietor/owner
  • Cash sales
  • Sale of an asset for cash
  • Collection from customers
  • Collection of interest, dividend or rent etc.
  • Loan from an individual, bank or any other financial institution

Explanation

The cash receipts journal is used to record all transactions involving the receipt of cash, including such transactions as cash sales, the receipt of a bank loan, the receipt of a payment on account, and the sale of other assets such as marketable securities.


An example of a common type of cash receipts journal is shown in the below example. As this example shows, a typical cash receipts journal has many columns. This is necessary because there are numerous transactions that result in a receipt of cash. The debit columns will always include a Cash column and most likely a Sales Discount column. Other debit columns could be used if the firm routinely entered into a particular transaction.

In the journal shown in the below example, the only other debit column is the Other Accounts column. This column is divided into three parts, one for the name of the account; one for the post reference, in this case, labeled Ref.; and one for the amount. If desired, the area for the name of the account in this column can be replaced by just an area for account numbers.

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 into which the firm enters. In our example, the only other credit column 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 just a Ref. column.

Cash Receipt Journal Example

To determine the use of cash receipt journal, assume that during June the Fortune Retail Store entered into the following transactions involving cash receipts:

  • June 1: Cash sales totaled $506.
  • June 2: Collected from Perry Alexander (account no. 17) $184.61 from the sale made in May. No sales discount allowed.
  • June 10: The firm sold marketable securities for $2,000 that is purchased for $1,800.
  • June 12: Collected $1,470 on account from Thomas Hunter (account no. 4), Sales discount of $30 allowed.
  • June 15: Cash sales totaled $1,200.
  • June 20: Collected $1,421 on account from Jerry Myers (account no. 26). A sales discount of $29 allowed.
  • June 22: Repayment of employee advance of $200.
  • June 30: Collection on account from William Young (account no. 15). Total received is $3,947.27 which represents an outstanding balance of $147.37 on June 1 and subsequent sale on June 18. No discount allowed.
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Each of these transactions is entered sequentially into the cash receipt Journal in the appropriate column. For example, the cash sale on June 1 is recorded in the cash receipts journal by first entering June 1 in the Date column. “Cash sales” are entered in the Explanation column. The amount of $506 is then placed in both the Cash Debit column and the Sales Credit column. It is not necessary to make an entry in the Account Credited column, because the entry in the Cash and the Sales columns makes it clear that this is a cash sale. Other entries are made in a similar fashion.

Format of cash receipt journal

Depending on the requirement of the business, different formats of cash receipt journal are used. To understand the recording procedure, a simple format is given below:

cash receipt journal

The purpose of various columns in the above cash receipt journal is explained below:

(1). Date column is used to record the date at which the cash is received by the business.

(2). Accounts credited column is used to enter the title of the respective account on which the cash is being received.

(3). Posting reference column is used to write the number of ledger account at the time of posting.

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(4). Cash column is used to record the total amount of cash received.

(5). Discount column is used to record the amount of cash discount allowed at the time of receiving cash from a customer.

(6). Sales column is used to record the sale of merchandise for cash.

(7). Accounts receivable column is used to to record cash received from customers.

(8). Sundry accounts column is used to record the credits to any account for which there is no special column, for example, the receipt of interest, receipt of cash for the return of merchandise purchased on cash etc.

Example

Record the following transactions in a cash receipt journal:

Year: 2016
Dec. 01: Received $500 from A & Co. in full settlement of his account of $525.
Dec. 04: Received $4,600 from Sam & Co. and allowed discount $50.
Dec. 08: Received $150 as interest on investment.
Dec. 15: Cash sales for the first half of the month $1,800.
Dec. 23: Received payment of $700 from A & Co. for goods sold on account. Discount allowed $30.
Dec. 24: Sold office supplies for cash $70.
Dec. 25: Received $1600 cash from Beauty Supply Corporation and allowed a cash discount of $100.
Dec. 31: Cash sales for the second half of the month $2,200.

Solution

cash-receipt-journal-example

Posting cash receipt journal to ledger accounts

The procedure of posting the cash receipt journal is described below:

  1. The total of cash column is posted as a debit to the cash account in general ledger.
  2. The total of sales column is posted as a credit to the sales account in general ledger.
  3. The amounts in the accounts receivable (A/C R.A) column represent cash received from debtors. These amounts are posted to the individual customer’s accounts in the accounts receivable subsidiary ledger.
  4. The total of accounts receivable column is posted as a credit to the accounts receivable account in the general ledger.
  5. Each amount in the sundries column is posted as a credit to the appropriate account in the general ledger. The total of the sundry accounts is not posted.
  6. None of the individual amounts in the cash and sales columns are posted.
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As with the other journals, the cash receipts journal is posted in two stages. Any entries in the Accounts Receivable column should be posted daily to the subsidiary accounts receivable ledger. This ensures that the individual customers’ accounts are up to date and accurately reflect the balance owed at that date. As these accounts are posted, the account number is entered into the post reference column. In the subsidiary ledger, the post reference is CR-8, which indicates that the 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. Again, in the general ledger accounts the post reference CR-8 is made to indicate that these entries came from page 8 of the cash receipts journal.

The amounts in the Other Accounts column must be posted accurately. 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. A check is placed under the total of this column, as this total is net posted. The postings are shown in the above example for the general ledger accounts Cash, Accounts Receivable, and Marketable Securities, and two selected subsidiary ledger accounts receivable accounts, Perry Alexander and Thomas Hunter.

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