Tracking Incoming Cash with the Cash Receipts Journal

By Lita Epstein from Bookkeeping For Dummies

7 of 12 in Series: The Essentials of Bookkeeping Transactions

The Cash Receipts journal is the first place you record incoming cash for your business. The majority of cash received each day comes from daily sales; other possible sources of cash include deposits of capital from the company’s owner, customer bill payments, new loan proceeds, and interest from savings accounts.

Each entry in the Cash Receipts journal must not only indicate how the cash was received but also designate the account into which the cash will be deposited. In double-entry bookkeeping, every transaction is entered twice — once as a debit and once as a credit. For example, cash taken in for sales is credited to the Sales account and debited to the Cash account.

In the Cash Receipts journal, the Cash account is always the debit because it’s where you initially deposit your money. The credits vary depending upon the source of the funds. The example shows what a series of transactions look like when they’re entered into a Cash Receipts journal.

The first point of entry for incoming cash is the Cash Receipts journal.

You record most of your incoming cash daily because it’s cash received by the cashier, called cash register sales or simply sales in the journal. When you record checks received from customers, you list the customer’s check number and name as well as the amount. In the figure, the only other cash received is a cash deposit from H.G. to cover a cash shortfall.

The Cash Receipts journal in the figure has seven columns of information:

Date: The date of the transaction.
Account Credited: The name of the account credited.
PR (post reference): Where the transaction will be posted at the end of the month. This information is filled in at the end of the month when you do the posting to the General Ledger accounts. If the entry to be posted to the accounts is summarized and totaled at the bottom of the page, you can just put a check mark next to the entry in the PR column. For transactions listed in the General Credit or General Debit columns, you should indicate an account number for the account into which the transaction is posted.
General Credit: Transactions that don’t have their own columns; these transactions are entered individually into the accounts impacted.

For example, according to the figure, H.G. deposited $1,500 of his own money into the Capital account on March 4th in order to pay bills. The credit shown there will be posted to the Capital account at the end of the month because the Capital account tracks all information about assets H.G. pays into the business.
Accounts Receivable Credit: Any transactions that are posted to the Accounts Receivable account (which tracks information about customers who buy products on store credit).
Sales Credit: Credits for the Sales account.
Cash Debit: Anything that will be added to the Cash account.

You can set up your Cash Receipts journal with more columns if you have accounts with frequent cash receipts. The big advantage to having individual columns for active accounts is that, when you total the columns at the end of the month, the total for the active accounts is the only thing you have to add to the General Ledger accounts, which is a lot less work then entering every Sales transaction individually in the General Ledger account.