Cash Receipts Journal
🎯 Learning Objectives
- Understand the purpose and structure of the cash receipts journal
- Identify all types of transactions recorded in the cash receipts journal
- Explain why multiple debit and credit columns are needed
- Perform the cross-footing test to verify journal accuracy
- Describe the posting process from cash receipts journal to ledgers
- Apply proper cash receipts procedures for various cash inflow sources
📚 Background & Principles
The cash receipts journal is a special journal used to record ALL transactions involving the receipt of cash. Unlike the sales journal which has only one amount column, the cash receipts journal has multiple columns because cash can come from various sources (customer payments, interest income, asset sales, etc.).
🔑 Key Concepts
The main debit column that always appears in the cash receipts journal, totaling all cash received.
Debit column for discounts given to customers who pay early (e.g., 2/10, n/30 terms).
Credit column for customer payments on account. Individual amounts post daily to subsidiary.
Credit column for cash sales of merchandise. Total posted at month-end.
Credit column for miscellaneous cash receipts (interest, rent, asset sales). Individual posting.
Verifying that total debits equal total credits in the journal (must always balance).
🔍 Deep Dive
Explore the cash receipts journal at different levels of depth:
🟢 Foundational Level
Understanding the basic concept of cash receipts tracking.
The Cash Drawer
Every Dollar In
This journal is the only place where money ENTERS the business.
If Cash is DEBITED (increased), it MUST be recorded here. No exceptions.
Instead of writing "Cash" on every line, we have a "Cash Dr." column. We sum it up at month-end.
Sources of Cash Receipts
| Source | Debit | Credit |
|---|---|---|
| Customer payment on account | Cash | Accounts Receivable |
| Cash sale of merchandise | Cash | Sales Revenue |
| Customer paying with discount | Cash, Sales Disc. | Accounts Receivable |
| Interest earned | Cash | Interest Revenue |
🟡 Standard Level
Understanding journal structure and the cross-footing test.
Cross-Footing Test
Total Debits Must Equal Total Credits
Cash Dr. + Sales Discounts Dr. = Total Debits
AR Cr. + Sales Cr. + Other Cr. = Total Credits
Total Debits MUST equal Total Credits. If not, there's an error!
Cash Receipts Journal Entry Example
Scenario: Received $980 from Customer A (1000 - 20 discount)
| Date | Account | Cash Dr. | Disc Dr. | AR Cr. | Other Cr. |
|---|---|---|---|---|---|
| Oct 5 | Customer A | $980 | $20 | $1,000 | |
| TOTALS | $980 | $20 | $1,000 | $0 | |
Check: $980 + $20 = $1,000 | $1,000 + $0 = $1,000 ✓ BALANCED
🔴 Advanced Level
Understanding posting controls and journal efficiency.
The Posting Process
Individual vs. Total Posting
| Column | Posted To | When |
|---|---|---|
| Cash Dr. (total) | Cash Control | Month-end |
| Sales Discounts Dr. (total) | Sales Discounts | Month-end |
| Accounts Receivable Cr. (individual) | Customer accounts | Daily |
| Sales Revenue Cr. (total) | Sales Revenue | Month-end |
| Other Accounts Cr. (individual) | Various accounts | Daily |
Handling Various Cash Sources
Journal Entry Patterns:
Dr Cash, Cr Accounts Receivable
Dr Cash, Dr Sales Discounts, Cr Accounts Receivable
Dr Cash, Cr Sales Revenue
Dr Cash, Cr Interest/Misc Revenue
🎨 Interactive: Cross-Footing Test
Enter column totals to verify the journal is in balance:
Debits
Credits
🚫 Common Misconceptions & Professional Tips
✅ Reality: Cash sales go in the Cash Receipts Journal because they involve a debit to Cash. The Sales Journal is ONLY for credit sales (debit to AR, not Cash).
✅ Reality: The Cash column is a SUMMARY column. The TOTAL is posted to the Cash Control account at month-end, NOT individual amounts.
✅ Reality: Cross-footing (verifying debits = credits) is ESSENTIAL. If they don't balance, there's an error that must be found before posting.
🧠 Memory Aids & Quick Reference
The Rule: If Cash is Debited → Cash Receipts Journal
Always Has: Cash Dr. column
Always Check: Total Debits = Total Credits
Summary column - TOTAL posts to Cash Control at month-end.
Individual posting - each customer name posts daily to subsidiary.
Summary column - TOTAL posts to Sales Revenue at month-end.
Cash Dr + Disc Dr = AR Cr + Sales Cr + Other Cr
📖 Glossary
A special journal used to record all transactions involving the receipt of cash, regardless of the source.
The process of verifying that total debits equal total credits in a journal by adding column totals horizontally and vertically.
A contra-revenue account debited when customers take early payment discounts (e.g., 2/10, n/30 terms).
The general ledger account that summarizes all cash transactions, supported by detailed cash records.
Column in the cash receipts journal for recording customer payments on account, posted individually to subsidiary.
Miscellaneous credit column for cash receipts not from customers or sales (interest, rent, asset sales).
A journal column containing totals that are posted to the general ledger at month-end rather than individually.
A journal column where each amount is posted to the appropriate ledger account individually (usually daily).
🎯 Knowledge Check: Cash Receipts Journal
Test your understanding of the cash receipts journal:
Question 1: Where is a cash sale of merchandise recorded?
Question 2: What is the cross-footing test?
Question 3: When are individual customer payments posted to the subsidiary ledger?
Question 4: When is the Cash column total posted to the general ledger?
Question 5: Which column must ALWAYS appear in the Cash Receipts Journal?