The cash receipts journal monitors cash flow and is essential to a successful business. This helps monitor and track the cash collected throughout a business’s cash transactions. When many think of a typical cash receipts journal, they think of simply keeping track of cash flow in a business, but these journals can serve many more purposes as well.
Journals are the foundation and an important part of the accounting process. They contain detailed records of business transactions and are used for reconciling accounts and transferring information to other accounting records. These records can include transaction amount, account name, receivable ledger, receivable account, and more.
There are many different types of journals used in accounting. Some of these include the general journal, the sales return journal, the sales journal, the cash disbursements journal, a purchase journal, a purchase returns journal, and a cash receipts journal.
What is a cash receipts journal?
A cash receipts journal is a special journal that records the receipt of cash by a business from any source during an accounting period. The journal records the cash flowing into the business. It also helps to keep track of the cash sale of items when the cash is received.
Cash receipt journals are beneficial in many ways. They are an efficient way of keeping track of all the cash received during an accounting period. They aid in the preparation of the cash flow statement and the cash receipt ledger. Cash receipt journals help to keep track of accounts receivable and aged receivables. Any transaction through the accounts recievable should also be listed to the accounts recievable ledger as well. Assuring that every cash transaction made is posted to the appropriate account is important as well in order to keep information organized within the journal.
They also keep track of outstanding supplier payments by matching cash received with cash paid.
Additionally, cash receipt journals can also help with cash payments that may be on an accrual basis while providing detailed lists of all the cash the company receives. Many businesses enjoy the benefits of a cash receipts journal as depending on the business, a large portion of their customers may prefer to use cash. This can be beneficial to avoid the headache that can sometimes come with making credit sales.
What is a cash receipts journal used to record?
As previously mentioned, cash receipt journals record the inflow of cash from any source.
Some of the most common sources include cash sales, collection on customer accounts, capital investments by the owner or proprietor, cash from long-term investments, asset sales for cash, collection on interest, collection on dividends, rental income, commissions received, tax refunds, donations received, or capital loans from a bank or an individual.
Cash receipt journals are not for transactions such as credit sales and debit but are meant for cash payments only. For additional accounting such as debit and credit sales transactions, it is best to find other sources for management.
What does a cash receipts journal do?
A cash receipts journal provides information about financial transactions, including deposits and withdrawals from banks and the entire payment of cash and receipts. These journals can also include additional information, such as Afterward, the general ledger accounts are updated by cash receipts journals. Cash receipt journals are sometimes called “specialized accounting journal.”
These journals can be beneficial to a business of any size, as long as they expect some amount of cash flow to come through their business. The cash basis of accounting can be difficult to manage and track, hence why a cash receipts journal can be so handy to use.
What should be recorded in cash receipt journal?
Typically cash receipt journals are used by corporations to record the money they have collected. These transactions include cash transactions, acquiring funds through a loan, payments through customer accounts or sale of assets. Below we have shown a typical cash receipt journal.
In terms of details, the journal entry would include additional information such as a date column, amount total, account number (if applicable), and so on.
What is CRJ and CPJ?
In cash receipt remitties journals, cash receipt records are recorded in the CRJ. A cash payment journal consists of the records of every amount paid by a customer.
How do you make entries to a cash receipts journal?
Making entries in a cash receipts journal is a pretty simple and straightforward process. Here is an example of how a cash receipts journal is set up.
The following are what gets posted in each column of a cash receipts journal:
Step 1. Date
Record the date the business received the cash.
Step 2. Accounts credited
Record the name of the account that is credited in the ledger as a result of the cash received.
Step 3. Reference
Post the number of the general ledger account as a cross-reference.
Step 4. Explanation
Write a brief description of the cash received.
Step 5. Cash
Record the amount of cash received.
Step 6. Sales discount
Record the dollar amount of any discount given to the customer.
Step 7. Sales
Record the amount of cash for the merchandise sold.
Step 8. Accounts receivable
Record cash received from customers paying on credit.
Step 9. Other accounts
Record credits here that don’t belong in cash sales or credit customers.
Example of a cash receipts journal with transactions
Let’s say, for example, you have a retail business that sells t-shirts called BigT. The following are business transactions and how they would be posted into the cash receipts journal.
- Nov 2: BigT made cash sales of $750
- Nov 7: BigT collected $300 from a sale to Mike Wilson (Account #3) made in October to pay towards the $500 remaining on the account
- Nov 10: Received $1,000 from ABC Elementary School giving a discount of $50
- Nov 15: Received $75 interest from an investment
- Nov 20: Employment advance of $100 repaid
- Nov 25: BigT had cash sales of $1,200
|Nov. 2||Cash sales||$750||$750|
|Nov 7||AcctRec||3||Mike Wilson||$300||$300|
|Nov 25||Cash sales||$1,200||$1,200|
Frequently asked questions
A journal is where financial transactions are first recorded and are recorded chronologically with a brief explanation. The journal is used to help prepare the ledger. The ledger sorts and groups accounts from the journal’s business transactions showing the summaries and totals of each individual income and expense account in the receipt ledger.
A cash disbursements journal is the counterpart to the cash receipts journal. The cash disbursements journal itemizes all business expenses made with cash. Typical information included in the disbursement journal is the check number, the payee, disbursement amount, and the transaction type.
A cash receipts journal is a very important tool used in the accounting cycle process. They are sources that contain the data that is used to gain valuable insight on the financial aspect of a business. Cash receipts journals are key when monitoring cash flow and accounts receivable, which are two essential accounts when it comes to the success of any business.
Caryl Ramsey has years of experience assisting in different aspects of bookkeeping, taxes, and customer service. She uses a variety of accounting software for setting up client information, reconciling accounts, coding expenses, running financial reports, and preparing tax returns. She is also experienced in setting up corporations with the State Corporation Commission and the IRS.
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