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Cash Receipts Journal

Updated on January 3, 2024
Article byWallstreetmojo Team
Edited byAshish Kumar Srivastav
Reviewed byDheeraj Vaidya, CFA, FRM

What is the Cash Receipts Journal?

The cash receipts journal is that type of accounting journal that is only used to record all cash receipts during an accounting period and works on the golden rule of accounting – debit what comes in and credits what goes out.

Credit salesCredit SalesCredit Sales is a transaction type in which the customers/buyers are allowed to pay up for the bought item later on instead of paying at the exact time of purchase. It gives them the required time to collect money & make the payment. read more are not recorded in this accounting journalAccounting JournalAccounting journal, often known as the book of original entry, is first used to record the company's accounting record whenever a financial transaction occurs. It's difficult to comprehend, yet it's crucial in business operations and accounting.read more because there isn’t any cash collected in those credit sales transactions. Cash sales work on the cash basis of accounting, and credit sales on the accrual basis of accountingAccrual Basis Of AccountingAccrual Accounting is an accounting method that instantly records revenues & expenditures after a transaction occurs, irrespective of when the payment is received or made. read more.

Cash-Receipt-Journal-Entry

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Types of Cash Receipts

They can be further divided into three different parts as well which are broken down below:

Types-of-cash-receipt-Journal

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Example of Cash Receipt Journal

When a retailer/wholesaler sells goods to a customer, and it collects cash, this transaction is recorded in the cash receipts journal.

Investment of capital by the owner of a business is recorded in cash receipts, sale of an asset for cash is recorded in cash receipts, all kinds of collections from credit customers are recorded in cash receipts, collection of bank interest,, dividendDividendDividends refer to the portion of business earnings paid to the shareholders as gratitude for investing in the company’s equity.read more or rental income is also recorded in cash receipts journal.

Another Loan taken by an individual from any bank or financial institutionFinancial InstitutionFinancial institutions refer to those organizations which provide business services and products related to financial or monetary transactions to their clients. Some of these are banks, NBFCs, investment companies, brokerage firms, insurance companies and trust corporations. read more is also recorded in the cash receipts journal. Any fee and commission received the maturity of an investment or an insurance policy, tax refunds for direct and indirect taxesIndirect TaxesIndirect tax, also known as consumption tax, is the type of tax the person does not directly bear. In contrast, the incidence of such taxes is passed on to the end consumer of goods or services by adding such taxes to the value of those goods or services, like Excise duty, Service tax, VAT, etc.read more, Donations received also form part of this journal and help keep track of liquidity inflow and cash flow analysis for an organization periodically, which ultimately forms part of IFRS reported financial statementsFinancial StatementsFinancial statements are written reports prepared by a company's management to present the company's financial affairs over a given period (quarter, six monthly or yearly). These statements, which include the Balance Sheet, Income Statement, Cash Flows, and Shareholders Equity Statement, must be prepared in accordance with prescribed and standardized accounting standards to ensure uniformity in reporting at all levels.read more and various disclosures made to other stakeholders and government authorities.

Cash Receipts Journal Format

The format usually looks like the below:

Structure of the Cash Receipts Journal

Explanation of Columns Used in Cash Receipts Journal

Practical Example

The following example shows how cash receipt journal accounting works and is recorded in accounting ledgersAccounting LedgersLedger in accounting records and processes a firm’s financial data, taken from journal entries. This becomes an important financial record for future reference. It is used for creating financial statements. It is also known as the second book of entry.read more:

List of Transactions

  • 07/08/2019 Cash Sales made of £5,000.
  • 12/08/2019 Cash received from credit customer Douglas of £490 after-sales discount of £10.
  • 14/08/2019 – Cash Sales made of £7,000.
  • 17/08/2019 Cash received from credit customer Rob of £990 after-sales discount of £10.
  • 20/08/2019 – Loan from Bank £1,500.
  • 21/08/2019 – Cash Sales made of £6,500.
  • 22/08/2019 – Interest received on Bank account of £350.
  • 23/08/2019 – Cash received from credit customer John of £741 after-sales discount of £9.
  • 25/08/2019 – Cash received from credit customer Amanda of £345 after-sales discount of £5.
  • 28/08/2019 – Cash Sales made of £9,000.

Advantages

Disadvantages

A single disadvantage of the cash receipts journal is that it only considers the cash basis of accountingCash Basis Of AccountingCash Basis Accounting is an accounting method in which all the company's revenues are accounted for only when there is an actual cash receipt, and all the expenses are recognized when they are paid. Small companies and individuals generally follow this accounting method.read more. It doesn’t consider the accrual basis of accounting which is the principal basis of doing double-entry bookkeeping and prudent accounting.

Post Posting Checks

There are two post posting checks which can be made following the posting of the cash receipts journal at the end of an accounting period to ensure that the transactions during the period have been correctly entered and presented in ledgers and the financial statements of an organization:

  • The total of all the customer sub-ledger balances appearing under the account heading accounts receivables should always be equal to the balance on the sub-ledger control account in the general ledger trial balance.
  • Also, the general ledger trial balance should always be in balance, which means that the total debits in the general ledger should equal the total credits so that the balance sheet also matches at the end.

This has been a guide to what is a cash receipts journal and its definition. Here we discuss its types, example, format, advantages, and disadvantages. You can learn more about economics from the following articles –

Reader Interactions

Comments

  1. Baitaku Tata says

    This is very helpful to me in my delivery to my Certificate II in Business. I am using some of the notes and take some as my examples to elaborate more to students.
    Thank you so much, especially allowing me to use your website and links.

    I will make use of it.
    Have a fantabulous day!

    Cheers

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