Cash Receipts Journal

The cash receipts journal is a special journal used to record the receipt of cash by a business. The journal is simply a chronological listing of all receipts including both cash and checks, and is used to save time, avoid cluttering the general ledger with too much detail, and to allow for segregation of duties. In some businesses, the cash receipts journal is combined with the cash disbursements journal and is referred to as the cash book.

The information recorded in the cash receipts journal is used to make postings to the subsidiary ledgers and to relevant accounts in the general ledger. The cash receipt journal is a book of prime entry and the entries in the journal are not part of the double entry posting.

Information Listed in the Cash Receipts Journal

The cash receipts journal format is usually multi-column. The information in the journal is taken from source documents such as remittances, cash receipts vouchers and checks, and typically includes the following:

  • Transaction date
  • Description
  • Check number
  • Amount
  • Cash receipt type columns (accounts receivable, fixed asset sales etc.)
  • Other

The cash receipt type columns will depend on the nature of business. Some businesses simply have one column to record the cash amount whereas others need additional columns for accounts receivable receipts, sales discounts, fixed asset sales, new capital, cash sales etc. The cash receipts journal should always have an ‘other’ column to record amounts which do not fit into any of the main categories.

Cash Receipts Journal Example

The use of the cash receipts journal is a three step process.

  1. Information is recorded in the cash receipts journal from the appropriate source documents.
  2. The cash receipt journal line items are used to update the subsidiary ledgers, such as the accounts receivable ledger.
  3. The cash receipt journal column totals are used to update the general ledger

It should be noted that, if the business maintains subsidiary ledger control accounts in the general ledger, then only step 3 above is part of the mdct.ru posting.

1. Cash Receipts Journal is Updated from Source Documents

Each cash receipt is recorded as a line item in the cash receipts journal as shown in the example below. In this example, it is assumed that all receipts are cash collections from customers who have outstanding amounts for credit sales, some information has been omitted to simplify the example. In practice, each line item would include the information listed above.

Cash receipts journal
Date Description Check no. Amount
06/03 BCD 1278 400
06/15 KLM 1589 150
06/30 PQR 123 350
Total 900

Each line represents the information from a cash receipt.

2. Cash Receipts Journal Used to Update the Subsidiary Ledgers

On a regular (usually daily) basis, the line items in the cash receipts journal are used to update the subsidiary ledgers. Normally most cash receipts are from credit sale customers, and the subsidiary ledger updated is the accounts receivable ledger. In the above example, 400 is posted to the ledger account of customer BCD, 150 to customer KLM, and 350 to customer PQR. When posting to the accounts receivable ledger, a reference to the relevant page of the cash receipts journal would be included.

As the business maintains control accounts in the general ledger, the entries in the subsidiary ledger itself (in this case the accounts receivable ledger) are not part of the mdct.ru, it is simply a record of the amounts collected from each customer.

3. Cash Receipts Journal Totals Used to Update the General Ledger

At the end of each accounting period (usually monthly), the cash receipts journal column totals are used to update the general ledger accounts. As the business is using subsidiary ledger control accounts in the general ledger, the postings are part of the mdct.ru system.

In the above example, the cash receipts journal column total for the month is 900, and in this particular case represents receipts from credit sale customers. The mdct.ru cash receipts journal entry would be as follows:

Cash receipts journal used to update the general ledger
Account Debit Credit
Cash 900
Accounts receivable 900
Total 900 900

In this case the debit entry to the cash account represents the cash collected from customers for the period, which increases the asset of cash.

The credit entry is to the accounts receivable control account in the general ledger, and represents the reduction in the amount outstanding from the credit sale customers. Had the cash receipts journal recorded other items such cash sales, fixed asset sales etc. then the credit would have gone to the appropriate sales or fixed asset disposal account.

Cash Receipts Journal and Discounts Allowed

When recording cash collections from customers it is quite common for the cash receipts journal to include a discounts allowed column. By using a discounts allowed column, the business can use the cash receipts journal to record the invoiced amount, the discount allowed, and the cash receipt. In this way, the line item postings to the accounts receivable ledger are for the full invoiced amount, and only the discounts allowed column total is posted to the general ledger.

For example, if a business collects cash of 490 from a customer in respect of a credit sales invoice of 500 less 2% cash discount, then the line item posting to the accounts receivable ledger would be for 500 to clear the customer account, and the discounts allowed column total of 10 (in this case assume there is only one item for the accounting period) is posted to the general ledger discounts allowed account.

Discounts allowed column used to update the general ledger
Account Debit Credit
Cash 490
Discounts allowed 10
Accounts receivable 500
Total 500 500

Cash Receipts Journal Proof of Postings

The are two checks which can be made following the posting of the cash receipts journal at the end of an accounting period to prove that the information has been correctly transferred to the ledgers, as follows:

  1. The total of all the subsidiary ledger balances (in this case the customer account balances in the accounts receivable ledger) should be equal to the balance on the subsidiary ledger control account in the general ledger.
  2. The general ledger should be in balance, that is to say, the total debits in the general ledger should be equal to the total credits.
Cash Receipts Journal February 8th, 2017Team

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