Sales-Cash Receipts - BC Bookkeeping Tutorials|dwmbeancounter.com

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Sales-Cash Receipts

Sales-Cash Receipts
Sales Journal

Definition & Purpose

The Sales Journal is a special journal where sales of services and merchandise made on account (business's customer is allowed to charge purchases) are recorded.

The normal entries recorded in this journal are a debit to the Accounts Receivable Control Account (a debit is also posted to the customer's Accounts Receivable Subsidiary Account) and a credit to the Sales Account and/or Sales Tax Payable Account.

Cash or Counter Sales are recorded in your Cash Receipts Journal. Cash or counter sales are sales to customers who pay for their purchases at the time of the sale with cash, check, or a credit card and are normally associated with retail (businesses that sell directly to consumers) types of businesses.

The Sales Journal has these basic features:

  • Header with the Name of the Journal and Page
  • Entry Number used as a reference to a specific transaction on the journal's page
  • Date Column to record the date of the transaction
  • Description Column to record the Customer's name or account and any other explanation or additional information about the transaction
  • Reference Column to record our sales invoice numbers
  • Posting Reference to provide information when a Subsidiary Ledger also needs to be updated - this tells us whether the Subsidiary Accounts Receivable Ledger has also been posted (updated)
  • Debit Column for Accounts Receivable Control and Credit Columns for Sales and Sales Tax Payable to record the amount of the sales transaction

Our illustrated Sales Journal has a Debit Amount Column for Accounts Receivable Control and Credit Amount Columns for Sales and Sales Tax Payable.

Sample Sales Journal
The totals for the month are posted to the General Ledger Accounts. In this example, a debit amount total of $15,000 is posted to the General Ledger Accounts Receivable Account (Control Account) and a credit amount total of $15,000 is posted to the General Ledger Sales Account. The  (X) 's tell us that they have been posted to the General Ledger Accounts and the Yellow Highlighted SJ-1 (Sales Journal - Page 1) is the reference used in the General Ledger Account to tell the source of the posting.

The Sales Journal totals are normally posted to the General Ledger Accounts, Control Accounts and Regular Accounts at the end of the month.

The Yellow Highlighted X in the posting reference column tells us that our Sales Invoice Number 5051 has been posted to our Accounts Receivable Subsidiary Ledger so that we can keep up with what our customer's owe us.

Our sales invoices are posted to our Accounts Receivable Subsidiary Ledger on a more frequent basis such as daily or weekly. Why ? We need to keep up with the current balances that our customers owe us.
Cash Receipts Journal

Definition & Purpose

The Cash Receipts Journal is a special journal that is used to record all receipts of cash.

The normal entries recorded in this journal are a debit to the Cash Account and a credit to the Accounts Receivable Control Account (a credit is also posted to the customer's Accounts Receivable Subsidiary Account), Sales, or Other Accounts (normally miscellaneous revenue accounts or loans).

This journal is used to record all the cash that we receive. The biggest sources of cash for businesses result from cash sales and collections from customer's who we have set up on open account (allowed them credit).

Our Cash Receipts Journal has these basic features:

  • Header with the Name of the Journal and Page
  • Entry Number used as a reference to a specific transaction on the journal's page
  • Date Column to record the date of the transaction
  • Description Column to record the customer's name or account and any other explanation or additional information about the transaction
  • Posting Reference to provide information when a Subsidiary Ledger also needs to be updated - this tells us whether the Subsidiary Accounts Receivable Ledger has also been posted (updated)
  • Debit Column for our Cash and Credit Columns for our Accounts Receivable Control Account (A/R), Cash Sales, and Sales Tax Payable
  • Special Other Credits Column with its related Posting Reference and Amount Columns
We use these three columns to record any other transactions resulting from receiving cash. Some examples are collection of a Note Receivable or borrowing money from a bank (Note Payable). In other words, we use these columns for any transactions that don't have their own special credit column.

Our illustrated Cash Receipts Journal has Credit Amount Columns for Accounts Receivable, Sales, Sales Tax Payable, and Other Credits and a Debit Amount Column for Cash.

Sample Cash Receipts Journal
Cash Receipts Journal Page 1
Entry No.DateCustomer Account Name/DescriptionPost Ref.A/R Credit Acct-150Sales Credit Acct-400Sales Tax Payable Credit Acct-210Other Credits GL AcctPost Ref.Amount CreditCash Debit Acct-100
1Jan 15,xxxx
All Other Customers
X6000




6000
2Jan 25,xxxx
Honest Bob's Used Cars-Check Number 605
X

4000




4000




CR-1Jan 31,xxxxTotals For Month10000
10000




(X)




(X)
The totals for the month are posted to the General Ledger Accounts. In this example, a debit amount total of $10,000 is posted to the General Ledger Cash Account and a credit amount total of $10,000 is posted to the General Ledger Accounts Receivable Account. The  (X) 's tell us that they have been posted to the General Ledger Accounts and the Yellow Highlighted CR-1 (Cash Receipts - Page 1) is the reference used in the General Ledger Account to tell the source of the posting.

The Cash Receipts Journal totals are normally posted to the General Ledger Accounts, Control Accounts and Regular Accounts at the end of the month.

The Yellow Highlighted X in the posting reference column tells us that Honest Bob's Used Cars Check # 605 has been posted to our Accounts Receivable Subsidiary Ledger so that we can keep up with what our customer's owe us.

Customer payments (checks,etc.) are posted to our Accounts Receivable Subsidiary Ledger on a more frequent basis such as daily or weekly. Why ? We need to keep up with the current balances that our customers owe us.
General Ledger - Accounts Receivable Control Account

A Control Account is a general ledger account that provides a summarized balance of the detailed balances of the individual records maintained in a subsidiary ledger. Summary Entries are posted from both the Sales and Cash Receipts Journals to the Accounts Receivable Control Account.
The Yellow Highlighted Posting Reference SJ-1 refers to the Sales Journal Page 1 where this entry came from (source). Likewise, the Yellow Highlighted Posting Reference CR-1 refers to the Cash Receipts Journal Page 1 where this entry came from (source).
Accounts Receivable Subsidiary Ledger
The Accounts Receivable Subsidiary Ledger's purpose is to provide detail information about transactions that are summarized in the Accounts Receivable Control Account. Both the Sales and the Cash Receipts Journals provide information needed for maintaining our Accounts Receivable Subsidiary Ledger.

Here's that "special book" that we use in order to keep up with how much each of our individual customer's owes us.

This "book" contains a detailed record for each of your customers. What information do you think you might want to keep up with about each of your customers ? Let's make a list of some information that you would include.

  • General Information
  • Customer's Name and/or Account Number
  • Phone Number
  • Billing Address
  • Shipping Address
  • Contact Person
  • Credit Limit
  • Credit Terms
  • Customer Financial Information
  • Each Invoice Billed to The Customer
  • Each Payment Received From The Customer
  • Total Balance Owed By Customer
  • Posting Reference-what journal the information was posted from
Normally all the information posted will come from the Sales and Cash Receipts Journals.

Sample Accounts Receivable Subsidiary Ledger
Total Balance of All Customer Accounts as of January 31,xxxx           $50,000
The Yellow Highlighted Invoice # 5050 in our customer Big Bob's Office Supply Account is just to emphasize that our Sales Invoices initially recorded in our Sales Journal are also recorded in our Customer Accounts in our Accounts Receivable Subsidiary Ledger.

The Yellow Highlighted Posting Reference Number SJ-1-2 in our customer Honest Bob's Used Cars Account tells us that Invoice # 5051 was posted from the  Sales Journal and the posting reference SJ-1-2 refers to our Sales Journal - January - Entry Number 2.

Likewise, the Yellow Highlighted Check Number 605 and Posting Reference Number CR-1-2 in our customer Honest Bob's Used Cars Account tells us that Check #605 was posted from our Cash Receipts Journal and the posting reference  CR-1-2 refers to our Cash Receipts Journal - January - Entry Number 2.
Accounts Receivable Control and Accounts Receivable Subsidiary Ledger Balances
After posting the Sales and Cash Receipts Journals to the Accounts Receivable Control Account and posting the indiviual items to the Accounts Receivable Subsidiary Ledger the balance of the Accounts Receivable Control Account and the sum of the detailed records in the Accounts Receivable Subsidiary Ledger should always be the same. In other words, a control account deals with summarized information while a subsidiary ledger deals with detailed information.

So you know, the Special Journals post to the General Ledger Accounts Receivable Control Account a summarized total for the main accounts at the end of the month and post each detail entry (invoice) daily or as needed to the Accounts Receivable Subsidiary Ledger. The totals will not be the same until the monthly posting is made to the General Ledger Accounts Receivable Control Account.

Why the different posting times ? We need to update the Accounts Receivable Subsidiary Ledger on a more frequent basis such as daily or weekly so we can maintain and monitor the current balance of what our customers owe us.
Let's see if our totals do agree after posting our Sales and Cash Receipts Special Journals.

The Total Amount Due from our Customers in our Accounts Receivable Subsidiary Ledger as of January 31,xxxx is $50,000.

Now let's take a look at our Accounts Receivable Control Account.
DescriptionAmounts
January 1,xxxx Beginning Balance
$45,000
Plus: Debit Balance Posted from our Sales Journal for the month of January xxxx  Reference Number: SJ-1
  15,000
Less: Credit Balance Posted from our Cash Receipts Journal for the month of January xxxx Reference Number: CR-1
  10,000
January 31,xxxx Ending Balance
$50,000
Sure enough the balance of the Accounts Receivable Control Account and the balance of The Accounts Receibable Subsidiary Ledger are the same.
Payment Terms
Let's first formally define what credit or payment terms are. Credit Terms are an agreement and understanding between a buyer and seller as to when payment will be made and any discounts that will be allowed. The terms of payment are normally included on the supplier's invoice. Some terms even try to encourage early payment by providing cash discounts.

Common Terms Used and How They're Stated (Abbreviated):

  • Payment At The Time Of Sale
  • Cash or Net Cash
  • Payment at The Time Of Delivery
  • COD-Cash On Delivery
  • Payment is Due Upon Receiving the Invoice
  • Due Upon Receipt
  • Number of Days Due From the Invoice Date
  • Net 30 days-payment is due 30 days from the invoice date
  • Net 60 days-payment is due 60 days from the invoice date
  • End Of Month Terms -n10/EOM-all purchases made in a given month are due by the 10Th of the following month
  • Terms with Discounts -2/10, Net 30-2% discount allowed if paid within 10 days from the date of the invoice; otherwise full amount due within 30 days from the date of the invoice.
Accounts Receivable Aging Report

Since we grant payment terms to our customers, we need a way of tracking whether our customers are paying on time based on the credit terms we granted them. Our Accounts Receivable Subsidiary Ledger provides the information we need for preparing our Accounts Receivable Aging Report. An Accounts Receivable Aging Report report, also known simply as an A/R report or aging A/R report, is used by many business owners who invoice their clients to keep track of what payments are due them from their customers. The main information an accounts receivable aging report shows is:
  • What payments are owed to us
  • When those payments are due, and
  • From which customer

An A/R aging report will typically list customers on one side (either alphabetically or by size of debt, depending on how it’s filtered) with invoice amounts in 30-day columns going across to 90 days plus.

Note: When using a manual bookkeeping system, preparing an Aging Report becomes a tedious and time consuming process.

Sample Accounts Receivable Aging Report
Shabby Computer Systems
Accounts Receivable Aging Report
as of December 31,xxxx
CustomerCurrent1-30 Days31-60 Days61-90 Days> 90 DaysTotal





















 Totals







What's Next ?

Sales and Cash Receipts Journals Video


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