How To Manage and Record Cash Receipts

Again, other columns can be used depending on the type of routine transactions that the firm engages in. A cash book is set up as a subsidiary to the general ledger in which all cash transactions made during an accounting period are recorded in chronological order. The primary goal of a cash book is to manage cash efficiently, making it easy to determine cash balances at any point in time, allowing managers and company accountants to budget their cash effectively. It is also much faster to access cash information in a cash book than by following the cash through a ledger. A cash receipts journal is a very important tool used in the accounting cycle process.

Receipt of Cash From Cash Sales

A cash receipts journal might look like a check register with a line for each transaction. Some businesses use receipt journals that create an original and carbon copy of a paper receipt, so the customer and business get copies of the sales receipt. Many businesses operate using only debit cards, credit cards, and checks, which leave a digital paper trail in your bank account, but that isn’t necessarily the case when buying and selling with cash. Both these journals can act as primary source documents to update subsidiary ledger accounts and ultimately the general ledger.

Combination of cash and credit

A cash receipts journal is a record of financial transactions that includes bank deposits and withdrawals as well as all cash payments and receipts. The general ledger account is then updated with the cash receipts journal entries. A cash payment journal, also called a cash disbursement journal, is a cash record of all transactions paid with cash by a firm. The cash payments journal tracks all credit transactions to cash, meaning all cash payments made by the firm that decrease the balance in the cash account.

What is the difference between a cash receipt ledger and a cash receipts journal?

In this situation 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. In this example, the cash receipts journal records the cash inflows received by the business during June. Each transaction is documented with its date, description, invoice number (if applicable), and the amount received in the cash account column. The cash receipt is then allocated to the appropriate revenue account, such as sales or service fees, or applied against a customer’s accounts receivable balance if it’s a payment for an earlier invoice. Provides a chronological record of all credit sales made in the life of a business.

Record the cash receipt transaction

  1. The cash receipt is then allocated to the appropriate revenue account, such as sales or service fees, or applied against a customer’s accounts receivable balance if it’s a payment for an earlier invoice.
  2. Pat uses a tablet-based digital cash register to track cash-based sales to understand which products are performing well and how many were sold.
  3. Here’s a closer look at how cash receipts may work for your business and why it’s so important to track every dollar that goes in and out of your company.

At the close of business today, you are ready to review your day’s business and make the appropriate entries in your accounting records. In accounting, journals are used to record similar activities and to keep transactions organized. 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.

Cash Receipts Journal Used to Update the Subsidiary Ledgers

Because accounting transactions always need to remain in balance, there must be an opposite transaction when the cash is posted. When cash is received, one of the other accounts – sales, accounts receivable, inventory – must also have a transaction listed. Purchase credit journal entry abc analysis is recorded in the books of accounts of the company when the goods are purchased by the company on credit from the third party (vendor). Special journals (in the field of accounting) are specialized lists of financial transaction records which accountants call journal entries.


Keeping track of your business’s cash receipts in a timely manner is necessary for efficient financial management. To keep your books accurate, you need to have a cash receipts procedure in place. Your cash receipts process will help you organize your total cash receipts, avoid accounting errors, and ensure you record transactions correctly. To ensure your books are accurate, you need to understand cash receipts accounting.

These opposite-side cash transactions can be made to and from the same customers though. Each cash journal has similar types of columns and information recorded. Therefore, when these two conditions are satisfied, the information taken from the cash book can be used as proof of posting. For most businesses, it is part of the cash book whereas the other section comprises the cash disbursement journal. Caryl Ramsey has years of experience assisting in different aspects of bookkeeping, taxes, and customer service.

Second, the inventory has to be removed from the inventory account and the cost of the inventory needs to be recorded. So a typical sales journal entry debits the accounts receivable account for the sale price and credits revenue account for the sales price. If you lose one or more cash sales receipts, it may be difficult to have an accurate balance sheet because the cash account will be incorrect.

Cash receipts are the written proof that your business has made a sale. One copy of the cash receipt goes to the customer as proof of buying the product or service, while another copy stays with the business that has made the sale. When customers pay with a mixture of payment methods, you need to account for it. If you accept checks, be sure to also include the check number with the sales receipt.

In that sense, these are two sides of the cash book where a business records all cash transactions. It means the account balances on a cash receipt journal would often be out of balance. The debit and credit sides would balance only when transferred to the general ledger. As a primary source document, it does not follow the double-entry accounting rules. Businesses often offer sales discounts to their customers to attract new buyers and increase revenue.

This can be beneficial to avoid the headache that can sometimes come with making credit sales. When recording cash collections from customers it is quite common for the cash receipt journal to include a discounts allowed column. By using a discounts allowed column, the business can use the receipts journal to record the invoiced amount, the discount allowed, and the cash receipt.

We follow strict ethical journalism practices, which includes presenting unbiased information and citing reliable, attributed resources. What’s most important is that they contain a clear record of key transaction details. The first simple step is to create an outlay of the journal by adding the required columns. Shaun Conrad is a Certified Public Accountant and CPA exam expert with a passion for teaching. After almost a decade of experience in public accounting, he created to help people learn accounting & finance, pass the CPA exam, and start their career. A check is placed under the total of this column as this total is net posted.

When done correctly, it helps in collections and managing discounts offered. It is not a mandatory document and most businesses using automated bookkeeping systems do not deploy it. A business records its cash receipts on this journal by entering all transactions made through cash and checks. GAAP attempts to standardize and regulate the definitions, assumptions, and methods used in accounting.

The use of the journal saves time, avoids cluttering the general ledger with detail, and allows for segregation of duties. Additionally in some businesses, the cash receipts journal is combined with the cash disbursements journal and is referred to as the cash book. A cash receipts journal is a booklet, usually a physical document, that helps business owners and managers track cash transactions in one centralized place.

As an accounting entry that records the receipt of money from a customer, a cash sales receipt is a debit. The cash receipts journal ignores the accrual basis of accounting, which serves as the foundation for sound accounting and double-entry bookkeeping. The cash receipts journal is used to track transactions where a shop or wholesaler sells products to a customer and receives payment in cash.