What it means
Special journals exist so that high-volume transactions of one kind can be recorded once, in a format suited to them, and posted to the ledger in totals. The cash receipts journal handles the money coming in.
Each line is a receipt; each receipt is credited to an account; and the analysis columns collect the credits by type so that the general ledger receives one posting per column per period rather than one per receipt. A traditional cash receipts journal has, on the left, the date, the payer and a description or reference (receipt number, transfer reference).
The next column is the debit to cash or bank, the amount received. The remaining columns analyse the credit: accounts receivable (payments from credit customers, with the customer's name so the receivables ledger can be updated), cash sales, sales tax collected, discount allowed (where a customer has deducted a settlement discount, shown as a debit so that the receivable is cleared in full), and sundry (interest, refunds, asset sale proceeds, loans, capital) with an account reference.
At month end the columns are totalled; the total of the credit columns less the discount debit must equal the cash column, which is the journal's built-in check; and the totals are posted. The journal is the primary evidence of income.
Auditors use it in both directions: selecting receipts from the journal and tracing them to the bank statement and to the sale or source (validity), and selecting bank credits, sales records and till readings and tracing them to the journal (completeness). Completeness is the harder test and the more important, because unrecorded income is both a fraud risk and a tax risk.
A numbered receipt sequence, till Z-readings, and a daily banking of takings intact against the journal are the mechanisms that make completeness testable. In software, every bank credit imported through the feed becomes a line in the receipts register, and every till day's sales are posted from the point-of-sale system.
The journal cannot omit a bank receipt, which removes one category of error, but it can misclassify one (an unapplied receipt sitting in suspense, a loan drawdown credited to sales), and the review of the register for unmatched and miscoded items replaces the traditional column check. Businesses that take physical cash still need the till-to-banking control, because a bank feed records what was banked, not what was taken.
The journal also serves management. Its analysed totals give the period's receipts by source; the receivables column, compared with credit sales, shows collection performance; the pattern of receipts by day shows the business's cash rhythm and feeds the forecast.
In practice
Real-world examples.
Example
A restaurant's receipts journal is populated daily from the point-of-sale system (cash and card by service) and the bank feed (processor settlements and deliveries), and reconciled weekly.
Example
A charity keeps an analysed receipts journal with columns for each fund and income type, from which the restricted fund accounts are prepared.
Example
An auditor selects 30 sales invoices and traces each to a receipt in the journal, finding two paid in cash and never recorded.
Think of it
“A cash receipts journal records every payment you receive-your incoming cash log.
Formula
Calculation
Journal balancing check: Cash or bank column (debit) = Sum of credit analysis columns minus Discount allowed column (debit)
Posting: Column totals to the general ledger at period end (debit bank; credit sales, receivables control, sales tax, sundry accounts; debit discount allowed); individual customer receipts to the receivables ledger daily
Worked example. A printing company's cash receipts journal for a week (sales tax at 10% on cash sales, shown separately):
- 2 Jun, ref T-0602, Counter sales (till): bank $1,760; cash sales $1,600; sales tax $160
- 2 Jun, ref BACS, Harbour Hotels Ltd, invoices 2231 and 2240, less 2% discount: bank $2,940; accounts receivable $3,000; discount allowed $60 (debit)
- 3 Jun, ref T-0603, Counter sales: bank $1,430; cash sales $1,300; sales tax $130
- 3 Jun, ref CHQ 118, Meadow School, invoice 2255: bank $850; accounts receivable $850
- 4 Jun, ref BACS, Insurance refund (overpaid premium): bank $215; sundry (insurance expense) $215
- 4 Jun, ref T-0604, Counter sales: bank $2,090; cash sales $1,900; sales tax $190
- 5 Jun, ref BACS, Unidentified transfer: bank $1,120; sundry (unapplied receipts) $1,120
- 5 Jun, ref BACS, Sale of old guillotine: bank $400; sundry (disposal proceeds) $400
- 6 Jun, ref T-0606, Counter sales: bank $1,650; cash sales $1,500; sales tax $150
- 6 Jun, ref BACS, Deposit interest: bank $18; sundry (interest received) $18
Column totals:
- Bank (debit): $1,760 + $2,940 + $1,430 + $850 + $215 + $2,090 + $1,120 + $400 + $1,650 + $18 = $12,473
- Cash sales (credit): $1,600 + $1,300 + $1,900 + $1,500 = $6,300
- Sales tax (credit): $160 + $130 + $190 + $150 = $630
- Accounts receivable (credit): $3,000 + $850 = $3,850
- Discount allowed (debit): $60
- Sundry (credit): $215 + $1,120 + $400 + $18 = $1,753
Check: credits $6,300 + $630 + $3,850 + $1,753 = $12,533; less discount debit $60 = $12,473 = bank column. The journal balances.
Posting: debit bank $12,473; debit discount allowed $60; credit sales $6,300; credit sales tax payable $630; credit receivables control $3,850; credit insurance expense $215; credit unapplied receipts (suspense) $1,120; credit disposal account $400; credit interest received $18. In the receivables ledger: Harbour Hotels credited $3,000 (clearing both invoices), Meadow School credited $850.
Controls: the four till references T-0602 to T-0606 are checked against the till Z-readings and the daily count (T-0605, Friday, is missing: the shop was closed for a public holiday, noted). The unapplied $1,120 is chased on Monday; it turns out to be a customer paying invoice 2248 ($1,120) from a new bank account without a reference, and is reapplied. The guillotine's disposal is matched to the fixed asset register, where the asset's carrying amount of $250 gives a $150 gain on disposal. The bank statement for the week shows every item in the journal and one additional credit, a $75 card processor adjustment, which is added.Case study
Seen in the real world.
A driving school with eight instructors recorded lesson payments in a receipts journal kept by the owner's daughter from the instructors' weekly sheets. Instructors collected cash and card payments from pupils, kept a share as their fee, and remitted the balance weekly with a sheet listing the lessons. The journal recorded the remittances, not the lessons.
Over three years the school's recorded income fell while the number of instructors and pupils grew; the owner assumed prices had been competed down. An accountant reviewing the business for sale traced a sample of pupils' bookings from the scheduling system to the receipts journal and found that a third of lessons never appeared: two instructors had been under-reporting their lessons and keeping the difference, and the journal had faithfully recorded what they chose to remit. The school moved to online booking with payment at booking, so that every lesson generated a receipt in the journal before it was taught; instructors were paid by transfer from the school rather than deducting their share; and the owner reconciled bookings to receipts weekly.
Recorded income rose 40% in the first quarter. The accountant's note observed that a receipts journal is only as complete as what reaches it, and that the school's had been recording the honesty of its instructors rather than its sales.
Watch out
Common mistakes.
- Recording receipts from bank statements at month end rather than daily from source, which loses the link to sales and delays the discovery of unapplied and missing receipts.
- An oversized or vague sundry column, which hides misclassified receipts such as loan proceeds credited to income.
- Relying on the journal to prove income without an independent record of sales (till readings, numbered receipts, bookings) to test it against for completeness.
Questions
People also ask.
What is the difference between the cash receipts journal and the cash book?
The cash book combines receipts and payments in one record and acts as the ledger account for cash. The receipts journal is the receipts side only, used where receipts and payments are kept in separate journals.
How is discount allowed handled in the journal?
As a debit column: the customer's account is credited with the full invoice amount (clearing it), the bank is debited with the cash actually received, and the difference is debited to discount allowed.
Where does an unidentified receipt go?
To an unapplied receipts or suspense account, chased immediately, and reclassified when identified. It should never be left in suspense past the month end.
From the founder's library
Take it further with the book.
Build your financial confidence beyond this definition. Shihan's full-length guide, Accounting Fundamentals, takes the same plain-English approach and turns it into a complete, practical playbook for non-finance managers, business owners and students - with chapter-end quiz answers and presentation slides included.
25% off with code MMHQ25, applied at checkout. Priced in USD - checkout may show the equivalent in your local currency.
View the book and save 25%