 In this presentation we will talk about the cash receipts journal. The cash receipts journal will be used when we have cash receipts when using a more of a manual system or a data input system that we will be doing by hand as opposed to an automated system. It's still useful to know the cash receipts journal if using an automated system for a few different reasons. One is that we might want to generate reports from an automated system similar to what we would be creating in a manual system for a cash receipts journal and two it's just a good idea to have different types of systems in mind so we can see what's the same and what is different between different accounting systems. The cash receipts journal will be used for every time we have cash receipts so the thing the transaction triggering a cash receipt will be when cash is being used and we're going to have a little bit more complexity in a cash receipts journal than something like a sales journal because we may be receiving cash for multiple different things. Note that the main thing we will be receiving cash for most of the time is going to be something like sales if we make sales consistently for cash rather than on account then that would be a great use of the cash receipts journal because we can have just two line items and record those two record those two out here and then sum them up at the end of the month or the other common transaction would be to receive cash on account the other side then being accounts payable but there are other types of things that we can be dealing with with cash and those things were typically going to put into the other category when dealing with those items breaking them out then at the end of the month when we do the adjustment or the journal entry at the end of the month and we'll total these up in order to then record the journal entry at the end of the month note that the cash receipts journal is most effective when we have many transactions that are much the same and we would record all those transactions for the time period whether that be the day the week or the month in our case it will be the month and then sum them up and record the one journal entry for them at the end of the time period so we're going to have the cash receipts journal once done with the cash receipts journal we will then do the the general journal a general journal entry which may seem like more work because we're doing a cash receipts journal and a journal entry but we are only doing one journal entry rather than a bunch of different journal entries here throughout the time period just one journal entry one debit and credit or it's going to be more than a debit and credit for this transaction but one journal entry as opposed to many in order to record the entire period's worth of data in our case the month's worth of data then we would post that to the general ledger and then the general ledger will be used to create the trial balance so let's go through some transactions we're going to say on seven one we've got the owner deposited money into the business bank account three thousand dollars so seven one we're going to say the owner is going to be the account credited and then we're going to have the explanation is going to be the owner investment so we'll give us some explanation if there is a vendor involved or in this case a customer involved we'll typically have the customer here the cash then we're going to say is three thousand we will always have this column here being a debit because it's the cash receipts journal anything where we got cash we'll have a debit in the cash receipts journal to cash the other side then we're going to put into other credit it's going to be another credit because it's not going to be a normal type of thing that we will have an owner investment probably it's not going to happen many times throughout the time period throughout the month hopefully not that many times that the owner has to put money in to the business they want to be taking the money out and therefore we will put it into the other breaking that out at the end using this account category here to do so next item we're going to say borrowed from the bank that happened on seven one we're just going to say the bank for the account credited and then we're going to have the explanation it's going to be a bank loan once again we will have a credit to cash because we are always going to i mean i'm debit to cash because we're always going to be increasing cash here because it's the cash receipts journal the other side then it's going to go to other again because once again we don't think we're going to have too many bank loans hopefully that's not the reason we're getting cash most of the time and hopefully most of the time we're making sales or getting money on account for sales made in the past so we're going to put that into other breaking it out at the point in time that we make the journal entry at the end of the time period in this case the end of the month next transaction on seven nine received cash for work that will be done in the future so we're going to say unearned revenue is going to be the account that we will be dealing with because remember our journal entries here we'd have to kind of know our journal entries to figure this one out if you know if we got cash and then we can't credit we debit cash and we can't credit the revenue account we're going to have to credit something else reason we can't credit revenues because we have not yet earned it and therefore can't record it until we earn it under the revenue recognition principle therefore their credit will then go to the unearned revenue a liability it's going to be an advanced payment so the customer paid us in advance in other words it will be an increase to the cash as always the 360 if this were a normal sale it would then go to the sales column which we would break out into a normal column but because it's not a normal sale for us we got paid before we're going to put it into other breaking it out at the end of the time period to unearned revenue now if we were a type of company that always had unearned revenue in other words if we did something like newspaper subscriptions and we always got paid before we did the work delivering the newspapers in that case then we would have another column of unearned revenue and that would be our normal transaction but for most companies we do the work before we get paid or at the same time and therefore this transaction would be somewhat unusual next transaction 720 completed job for s company received 250 will receive at a later date 300 so we did work and we got some money but not all the money this is going to be a confusing transaction because even if we just said we did work and got cash even if it wasn't broken out between these two it's often something that we will get wrong in terms of what journalists will go into because clearly we made a sale we completed a job we basically made a sale in that case and you would think it would go in the sales journal but the sales journal is only there when we have something on account and in this case we got cash so anytime you get cash even if it's for a sale it's going to go into the cash receipts journal rather than the sales journal so we're going to say the s company is going to be the company we want to list out the company here so that we can know what the subsidiary account will be and we don't need to have the account credited here because the account will be in the sales column for this case what we do want to do is is break out who we're selling to so that the accounts receivable component will be there uh explanation will be sales and then we're going to say the amount going up is the 250 so we only got 250 out of the total uh 550 that we did work for the other side then is going to go well then we're going to have sales going up by 550 that being the 300 plus the 250 that's what we did the work for but we only got 250 cash therefore 550 minus 250 is the 300 the 300 going over here into the other uh debit and that's going to be a bit confusing because you might say hey we got an accounts receivable right here why don't we record it to the accounts receivable because that's what this is going to be representing that's what we are owed from we sold 550 only got 250 therefore accounts receivables going up by 300 but this column represents a credit to accounts receivable the normal transaction we would expect when we are dealing with the cash receipts journal because if we got cash related to accounts receivable it's because accounts receivable is then going down someone paid us off therefore not only does money any longer so this is going to be an accounts receivable but it's going to be a debit increase in accounts receivable not very normal for a cash receipts journal therefore we're going to put it into the others category here next transaction we're going to say that completed a job for L company invoice 700 received 200 account to be received in the future should be amount is 500 so now we're going to say that this is going to be the same type of transaction probably one of the more difficult types of transaction although we made a sale it's not going to go in the sales journal because we got cash and should be recording the cash received so we're going to put it into L company here and that's going to be so that we can record this to the subsidiary ledger then we're going to be having the sales is going to be the explanation of what happened we got cash of 200 we sold something worth 700 or services worth 700 got 200 of it then we're going to say that sales went up by that 700 the difference 700 sales minus the 200 is the increase in accounts receivable once again not going into accounts receivable here because this is going to be the credit to accounts receivable it's going into accounts receivable here into an other account because it's kind of an unusual type of transaction note that the transactions that have more than one account of course are going to be more complex type of accounts here as well as any time we're recording transactions with more than two accounts then we have on 727 received cash from in the company for work done in the past so 727 we're going to label this in company okay we received work for we received cash for work done in the past we're going to call that received cash on account so we got money basically on account meaning we did work in the past and we're going to get paid now we're going to say that the cash is going to go up by the 150 to the debit to the cash the other side is now going to go to the accounts receivable as we would normally expect accounts receivable to behave when looking at a cash receipts journal so the accounts receivable it would go down if someone paid us and then the cash side would go up next transaction we're going to say receive cash from P company for work done in the past so same type of idea we're going to say in 730 we've got P company is paying us we want to label that so we can record it in the subsidiary ledger we're going to receive on account received cash on account received cash for work done in the past and then companies owning us for that work done in the past we're going to say it's going to go up to cash of 425 the amount received always debiting the cash in the cash receipts journal the other side then going to the accounts receivable decreasing the accounts receivable this being a really normal transaction so if we're in a type of industry where we make sales on account and then we collect on those accounts this cash receipts journal would probably be filled with pretty much mostly these transactions all the way down if on the other hand we make sales on account then the cash receipts journal would be filled with mostly this column here and these other columns are ones we really want to practice because those are the confusing ones in tests and in practice but ones that are more rare or not the norm or not the transactions made 90% of the time then we're going to total this stuff up so we're going to total everything up in the cash side we got the 3000 cash the 8000 the 360 the 250 the 200 plus the 150 plus the 425 giving us total of 12385 the accounts receivable 150 plus 425 gives us a total of 575 in the sales 550 plus 700 gives us a total of 1250 in the other credit 3000 plus 8000 plus 360 gives us the total of 11360 and other debit 300 plus the 500 gives us the 800 we're going to use these totals then to post one time instead of 1234567 separate journal entries to the general journal and then use that to create the general ledger so here's our information up top here's our totals we're going to create our general journal just one time this time instead of multiple times that's what's saving us time so we're going to say first we've got to the checking account so here's the cash and the checking account we will be debiting the checking account it's going up cash is a debit balance we're going to do the same thing to it which is an increase or a debit the other side is going to go to the accounts receivable here's the 575 going to account receivable account receivable being an asset and then having a debit balance we're going to make it go down doing the opposite thing to it a credit then we've got these sales so here's going to be the sales item we're going to call it revenue here sales is typically used for a merchandising company and revenue or or fees earned or something for a service company we will use the sales term here because it's often used in the journals when we have a sales journal we typically call the sales journal rather than a revenue journal so we'll keep that term and we will look briefly at a merchandising company as well then we're going to have the other which we have to break out note we can't just use this 11 360 because we don't know which account it goes to that's the point of putting it into other we don't know where it goes so we're going to have to look over here and say okay this went to the owner owner investment that means it's going to be the capital capital has got to be increasing that's what represents the owner investing money in a sole proprietor therefore we're going to increase capital capital has a credit balance we're going to increase it as it says here with a credit so we'll increase the capital then we have the bank so the bank loan another uh other transaction in the credit note we debited of course for these both of these the debit is already included here in the 12385 we already got that we just need the credit side related to this amount so the total is already there we need the credit side so in this case it's going to be a bank loan so that's going to be something like a notes payable that will record this too uh that's a liability account we need to make it go up so we'll do the same thing to it another credit as is indicated here then we have the unearned uh revenue so unearned revenue here again the debit the cash is already included in this 12385 right there now we need to include the other side in this case going to unearned revenue a liability account liabilities having a credit balance we're going to increase it doing the same thing to it another credit then we've got the others being a 300 and the 500 adding up to 800 and that's going to go into the accounts receivable and note we can sum this up because these two we see we can see they're doing the same thing it's both going to be the sales and it went to s company therefore it's going to go into accounts receivable and we can just put that into the account receivable one time and increase the accounts receivable here then we're going to take this information this journal entry and post that to the general journal so we'll just list out the general journal our general ledger the general ledger accounts that we have so the cash is going to be here it started at zero we're increasing it 12385 to 12385 by this amount of the entry then we've got this 575 to the accounts receivable bringing the uh 2070 balance down by 575 to the 1495 then we've got the revenue here going from zero up by 3000 to 3000 then we've got the notes payable going from zero up by 8000 to 8000 then we've got the unearned revenue going from zero up by 362 360 and finally once again the accounts receivable being here 1495 and then we've got the debit of 800 bringing it up to 2295 these ending balances then can be found and used to generate the trial balance note of course this isn't all the accounts of the general ledger it's just the ones that we're considering here so here's the 12385 12385 accounts receivable 2295 is here 2295 we've got the notes payable 8000 here is the notes payable and the liability count 8000 there we've got the unearned revenue on the general ledger here it's going to be on the trial balance there and finally the capital account here on the general journal or the general ledger and here it is on the trial balance and then the revenue account looks like i'm not sure if i skipped the revenue account but here's the 1150 so it's going from 2070 up by 1001 52 3000 320 that too here is on the trial balance and of course trial balances in balance debits equaling the credits net income now is including just this revenue that we recorded in net income finally we're going to take a look at the accounts receivable subsidiary ledger because you'll note that these items here are dealing with customers and we want to break out more than just this item here we know how much people owe us but we need to know who owes us money so that we can collect on that money more easily to do that we do the accounts receivable subsidiary ledger so we're basically taking our cash receipts journal looking at these items here to break out this number so this number that we recorded that's our ending accounts receivable here's the activity that we did in summary during the time period and now we're going to have to break out that activity by customers so first we've got the 300 here that's where the accounts receivable for this transaction for S company so S company made a sale and we have it we didn't collect 300 of it and therefore S company owes us 300 bringing the balance from 425 up by 300 to 725 same thing for L company they still owe us 500 for a transaction bringing the balance up from 0 by 500 to 500 and then we have the accounts receivable here going down for M company we got paid and therefore are decreasing the accounts receivable so here we've got the the 500 going down by 150 to 350 and then the 425 same concept we got the 1,145 going down by the 425 to the 7,720 so then if we add up all the accounts receivable we should tie out then to the accounts receivable in the general ledger breaking that out by who owes us the money