The cash receipts journal manages all cash inflows of a business organization. In other words, this journal is used to record all cash coming into the business. For recording all cash outflows, another journal known as cash disbursements journal or cash payment journal is used.
For making entries in a cash receipts journal, the receipt of cash is usually divided into the following categories:
- Receipt of cash from cash sales
- Receipt of cash from credit customers and
- Receipt of cash from other sources
A cash receipts journal usually looks like the following:
Explanation of the columns used in cash receipts journal
- Date: The date at which the cash is received is entered in date column.
- Account credited: The account credited column is used to enter the title or name of the account that is credited in ledger as a result of cash inflow. For every inflow of cash, one or more accounts are essentially credited in accounts receivable subsidiary ledger or in general ledger or in both.
- Post reference: The post reference column is used to enter the account number of subsidiary or general ledger account to which the entry belongs.
- Explanation: The explanation or reason of the cash inflow is briefly explained in this column.
- Cash: In cash column the amount of cash received is entered. The cash account in general ledger is debited by the total of this column.
- Sales discount: Sellers allow discount to customers that make payment within discount period. The amount of discount allowed to customers is entered in sales discount column. The sales account maintained in general ledger is debited by the total of this column.
- Accounts receivable: When a credit customer makes the payment, his account is credited in accounts receivable subsidiary ledger. The amount by which a customer’s account is credited is entered in this column.
- Sales: This column is used to record cash sales. Every time a cash sale is made, the amount received is entered in this sales column
- Other accounts: This column is used to record the receipt of cash from sources other than cash sales or credit customers. Examples include the receipt of cash for interest, rent and the sale of old assets etc.
- Cost of goods sold/inventory: In cash receipt journal, this column is used to record the cost of merchandise sold for cash. This column is also found in sales journal where it is used to enter the cost of goods sold on credit. The total of this column is debited to cost of goods sold account and credited to inventory account in general ledger.
The following example illustrates how a cash receipt journal is written and how entries from this journal are posted to relevant subsidiary and general ledger accounts.