Cash Receipts Journal: Definition, Types, Pros & Cons

Sales credit journal entry is vital for companies that sell their goods on credit. The cash receipts journal would cover items like payments made by customers on an unpaid accounts receivable account or cash sales. Whereas the cash disbursement record would include items like payments made to vendors to lower accounts payable.

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Balance Sheet

When a customer purchases inventory on credit, the sale isn’t directly recorded in the cash receipts journal because no cash has actually been collected. Instead, the accounts receivable account is debited and the sales account is credited. When the credit customer returns to pay off his account, cash is collected however. In contrast 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 receipt 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. All cash receipts for a given accounting period are recorded in the cash receipts journal, a special kind of accounting journal.

For this reason the entries in the journal are not part of the double entry posting. For example, the cash sale on June 1 is recorded in the cash receipts journal by first entering June 1 in the date column. The amount of $506 is then placed in both the cash debit column and the sales credit column. The credit columns in a cash receipts journal will most often include both accounts receivable and sales. Again, other columns can be used depending on the type of routine transactions that the firm engages in. A sales credit journal entry record helps companies credit the respective account with the amount receivable with the details about the transaction.

How are the totals from the different columns in a cash receipts journal posted to general ledger accounts?

Keep in mind, the cash receipt process varies from business to business. You can tweak the above steps to better fit the workflow of your company. If you accept checks, be sure to also include the check number with the sales receipt. To make sure your books are as accurate as possible, make sure you organize business receipts using a storage system (e.g., filing cabinets or computer).

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Finance Strategists is a leading financial education organization that connects people with financial professionals, priding itself on providing accurate and reliable financial information to millions of readers each year. The articles and furniture and fixtures in accounting research support materials available on this site are educational and are not intended to be investment or tax advice. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly. Despite the advantages discussed above, there are a few factors from the other end of the spectrum that prove to be a hassle or hurdle for organizations. Let us understand by discussing the disadvantages from the explanation below. In the above example, John Electronics could not make payment by January 30, 2018, and it went bankrupt.

1. It means that the value of sales recorded in the income statement is the net of sales discount, cash, or trade discount.
2. For example, the cash sale on June 1 is recorded in the cash receipts journal by first entering June 1 in the date column.
3. All cash receipts for a given accounting period are recorded in the cash receipts journal, a special kind of accounting journal.
4. The cash receipts journal ignores the accrual basis of accounting, which serves as the foundation for sound accounting and double-entry bookkeeping.

Credit sales are not recorded in this accounting journal 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 accounting. The information recorded in the cash receipt journal is used to make postings to the subsidiary ledgers and to relevant accounts in the general ledger. It is important to realize that the cash receipt journal is a book of prime entry.

It doesn’t consider the accrual basis of accounting which is the principal basis of doing double-entry bookkeeping and prudent accounting. When a retailer/wholesaler sells goods to a customer, and it collects cash, this transaction is recorded in the cash receipts journal. As the example shows, a typical cash receipts journal consists of many columns. This is necessary because there are numerous transactions that lead to the receipt of cash. If you plan on depositing cash payments, make sure your deposit slip amount matches your cash receipts journal. Store deposit receipts along with your other business receipts in case of any discrepancies.

When the goods are sold on credit to the buyer of the goods, the sales account will be credited to the company’s books of accounts. Therefore, it will increase the revenue and reflect in the company’s income statement during the sale period. As an accounting entry that records the receipt of money from a customer, a cash sales receipt is a debit. And that is that it only takes into consideration the cash basis of accounting.