There are two types of transactions that take place on a frequent basis in a business or household, namely cash receipts and cash payments. We make use of two subsidiary books to summarize these cash transaction before entering them into the general ledger. The two subsidiary books are called the Cash Receipts Journal and the Cash Payments Journal. It stands to reason that the Cash Receipts Journal is used to summarize all the Cash Receipts of the business/household and the Cash Payments Journal is used to summarize all the Cash Payments of the business/household.
How to use a Cash Receipts Journal is lesson 10 in the Authentically Ash Online Bookkeeping Course. Please note that the $ sign below is a representation of money and not any specific currency.
How to make entries into a Cash Receipts Journal
Cash Receipts of a business or household are recorded into the Cash Receipts Journal of the business. A Cash Receipts Journal has a separate column for each income that is received more than once a month. At the end of the month, the total of the column will be posted to the General Ledger.
For example, if you have 4 rental properties, and you receive a rental income for each one, then you may have a Rent Income column in the Cash Receipts Journal. Or if there are 3 adults earning salaries in the household, and they all contribute to the household finances, then you would have a column called “Member Contribution”. In a service business, you may have a column called “Current Income” to represent the income you receive for services rendered.
The time frame between posts to the Cash Receipts Journal doesn’t have to be one month, you could make it each week or each day depending on the number of transactions that go through your household or business. I have found that monthly is sufficient for a household.
Source Documents of the Cash Receipts Journal
When you make entries into the Cash Receipts Journal, you would use the following source documents:
- Duplicates of receipts
- Cash Register Roll
- Duplicates of deposit slips
- Proof of EFT payments
- Bank Statement
What does Cash Receipts Journal Paper look like?
Below is a page from a cash receipts journal. I have also provided a Free Cash Receipt Journal Paper (PDF).
- Name of the Subsidiary book (e.g. Cash Receipts Journal)
- Name of the business/household the book belongs to. (e.g. Johnson Mechanics, Letley Household)
- Month and year to which the transactions below belong. (e.g. November 2015)
- Number of the page in the Cash Receipts Journal. (e.g. CRJ1)
- Number of the source document for the transaction.
- Day of the month on which the money was received and the entry was made
- Details of the Cash Receipts (e.g. Services Rendered, Mark’s Salary Contribution etc.)
- Folio number of the Debtor’s account that is credited if the money received was in payment of a debt to the business / household. I will discuss how debtors work in a later article.
- Amount of money received. The total of this column will usually indicate how much money is available in cash before it is deposited into the bank.
- Amount that is deposited into the bank account according to deposit slips, or proof of an EFT transfer.
- The current income of the business for services rendered. This is an analysis column.
- The Sundry Accounts are used when money is received for something that does not have it’s own column.
- Amount of money payable to the sundry account.
- Folio number of the account that will be credited.
- Name of the account that will be credited.
In the example above there is only one analysis column (Current Income). You can have more than one analysis column for your business or household. For example, you may rent out rooms in a guest house, but also run a restaurant in your guest house. Therefore you could have a rental income column and a restaurant income column. A household will most likely have a “Member Contribution” column.
Example of entering transactions into a Cash Receipts Journal
We are going to give an example of Johnson Mechanics once again. The following transactions took place:
- On 2 November 2015, A Johnson deposited his capital contribution of $70,000 into the business bank account.
- On 3 November 2015, A Johnson received $1,000 for servicing vehicles.
- On 4 November 2015, A Johnson received $500 for servicing vehicles.
- On 6 November 2015, A Johnson received $2,000 for servicing vehicles.
- On 7 November 2015, A Johnson deposited the money he received for the week into his bank account.
Below you will see the Cash Receipts Journal of Johnson Mechanics
After reading this, you should be able to keep a Cash Receipts Journal for your business. In my next article I will explain how to post the information from the cash receipts journal to the General Ledger. Your task is to start keeping a Cash Receipts Journal for your household/business. Here is the Free Cash Receipt Journal Paper (PDF)