Which Of The Following Entries Records The Receipt Of Cash From Cash Customers For Services Provided

The greenbacks receipts journal is a special periodical used to record the receipt of cash by a business. The periodical is only a chronological listing of all receipts including both greenbacks and checks, and is used to salve fourth dimension, avoid cluttering the general ledger with also much detail, and to allow for segregation of duties. In some businesses, the cash receipts journal is combined with the cash disbursements journal and is referred to every bit the cash volume.

The information recorded in the cash receipts journal is used to make postings to the subsidiary ledgers and to relevant accounts in the full general ledger. The cash receipt journal is a book of prime entry and the entries in the journal are not part of the double entry posting.

Data Listed in the Cash Receipts Journal

The greenbacks receipts journal format is usually multi-column. The data in the journal is taken from source documents such equally remittances, cash receipts vouchers and checks, and typically includes the following:

Transaction appointment – the engagement the cash is received.
Transaction reference – an internal reference for the transaction.
Description – a description of the transaction indicating the account to exist credited.
Ledger page – a reference to the subsidiary or general ledger.
Amount – the total greenbacks receipt corporeality.
Analysis columns – an analysis of the cash receipt into types such equally accounts receivable, cash sales, stock-still nugget sales, other etc.

The greenbacks receipt type columns will depend on the nature of business organisation. Some businesses simply accept 1 column to record the greenbacks amount whereas others need boosted columns for accounts receivable receipts, sales discounts, fixed asset sales, new capital, cash sales etc. The greenbacks receipts journal should always take an 'other' column to record amounts which practice not fit into any of the main categories.

It is important to understand that if any greenbacks is received, even if it relates only to a office of a larger transaction, then the entire transaction is entered into the cash receipts journal.

Cash Receipts Journal Example

The use of the cash receipts journal is a iii step procedure.

Information is recorded in the cash receipts journal from the appropriate source documents such equally bank paying-in books, bank statements and advice slips.
The greenbacks receipt periodical line items are used to update the subsidiary ledgers, such every bit the accounts receivable ledger.
The cash receipt journal column totals are used to update the general ledger

It should exist noted that, if the business concern maintains subsidiary ledger command accounts in the general ledger, so only pace iii above is office of the double entry bookkeeping posting.

1. Cash Receipts Journal is Updated from Source Documents

Each cash receipt is recorded every bit a line item in the cash receipts journal as shown in the example below. In this example, it is assumed that receipts are cash collections from customers who accept outstanding amounts for credit sales, and receipts from cash sales.

Each line represents the information from a cash receipt.

ii. Cash Receipts Periodical Used to Update the Subsidiary Ledgers

On a regular (usually daily) basis, the line items in the cash receipts periodical are used to update the subsidiary ledgers. Usually near cash receipts are from credit auction customers, and the subsidiary ledger updated is the accounts receivable ledger. In the above instance, 550 is posted to the ledger business relationship of customer A and 350 to customer C. When posting to the accounts receivable ledger, a reference to the relevant page of the cash receipts journal would be included.

As the business concern maintains control accounts in the full general ledger, the entries in the subsidiary ledger itself (in this case the accounts receivable ledger) are not part of the double entry bookkeeping, information technology is simply a tape of the amounts collected from each customer.

3. Greenbacks Receipts Journal Totals Used to Update the Full general Ledger

At the end of each bookkeeping period (unremarkably monthly), the cash receipts journal column totals are used to update the general ledger accounts. As the business is using subsidiary ledger control accounts in the general ledger, the postings are part of the double entry accounting system.

In the to a higher place example, the cash receipts periodical column total for the month is 1,050, and in this particular case represents receipts from credit sale customers of 900 and receipts from cash sales of 150. The double entry bookkeeping cash receipts periodical entry would be as follows:

Greenbacks receipts journal used to update the general ledger
Account	Debit	Credit
Cash	1,050
Accounts receivable		900
Greenbacks sales		150
Total	1,050	one,050

In this case the debit entry to the greenbacks business relationship represents the greenbacks collected from customers for the period, which increases the nugget of cash.

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 receipts journal recorded other items such greenbacks sales, stock-still asset sales etc. then the credit would have gone to the advisable sales or fixed asset disposal account.

Cash Receipts Journal and Discounts Immune

When recording cash collections from customers information technology is quite mutual for the cash receipts journal to include a discounts allowed column. By using a discounts allowed column, the business tin can use the greenbacks receipts journal to tape the invoiced amount, the discount allowed, and the cash receipt. In this way, the line item postings to the accounts receivable ledger are for the full invoiced amount, and merely the discounts allowed cavalcade total is posted to the general ledger.

For example, if a business collects greenbacks of 490 from a client in respect of a credit sales invoice of 500 less two% cash disbelieve, and so the line item posting to the accounts receivable ledger would exist for 500 to clear the client account, and the discounts immune column full of 10 (in this case assume there is just one item for the bookkeeping period) is posted to the full general ledger discounts immune account.

Discounts allowed column used to update the general ledger
Account	Debit	Credit
Cash	490
Discounts immune	10
Accounts receivable		500
Total	500	500

Cash Receipts Journal Proof of Postings

The are ii checks which can exist made following the posting of the cash receipts journal at the stop of an bookkeeping menses to testify that the information has been correctly transferred to the ledgers, as follows:

The total of all the subsidiary ledger balances (in this case the customer account balances in the accounts receivable ledger) should be equal to the balance on the subsidiary ledger control business relationship in the general ledger.
The full general ledger should exist in residue, that is to say, the total debits in the general ledger should exist equal to the total credits.

About the Author

Chartered accountant Michael Brown is the founder and CEO of Double Entry Bookkeeping. He has worked equally an auditor and consultant for more than 25 years and has built financial models for all types of industries. He has been the CFO or controller of both pocket-sized and medium sized companies and has run pocket-size businesses of his own. He has been a managing director and an accountant with Deloitte, a big 4 accountancy business firm, and holds a degree from Loughborough University.

March 12, 2020