So, you want to learn
Bookkeeping!
Special Journals
by Bean Counter's Dave Marshall

Lesson 4
Cash Receipts & Sales Journals


Introduction Lesson 1 Lesson 2 Lesson 3 Lesson 4 Lesson 5 Lesson 6
Bean Counter

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 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.

Do you know the name of the record or ledger that works in conjunction with the sales journal to maintain the detailed customer information ? Accounts Receivable Subsidiary Ledger is the answer I was hoping for.

Special Journal Sales/Accounts Receivable

Sales Journal Page 1
Entry No. Date Customer Account
Name/Description
Invoice Number Post Ref. Accounts Receivable
Acct-150
Debit
Sales
Acct-400
Credit
Sales Tax Payable
Acct-210
Credit
1 Jan 4, xxxx Big Bob's Office Supply 5050 X 1000 1000  
2 Jan 10, xxxx Honest Bob's Used Cars 5051 X 4000 4000  
3 Jan 18, xxxx Super Flic Movies 5052 X 5000 5000  
4 Jan 25, xxxx Shaggy Dog Vet 5053 X 3000 3000  
5 Jan 30, xxxx Greasy Spoon 5054 X 2000 2000  
               
SJ-1 Jan 31, xxxx Totals for Month     15000 15000  
          (X) (X)  

Clicking on the yellow highlighted X illustrates that invoice number 5051 was posted in the Sales Journal and also posted to the Accounts Receivable Subsidiary Ledger for Honest Bob's Used Cars. To return click on the yellow highlighted SJ-1-2.

Clicking on the yellow highlighted SJ-1 illustrates that the monthly total for January was posted to the General Ledger Accounts Receivable Control Account-150. To return click on the yellow highlighted SJ-1.

Can you tell me what other General Ledger Account needs to be posted for the month of January that we didn't illustrate in our example ? How about that 400 Account in the Posting Reference Column ? That's right the General Ledger Sales Account also needs the January total from the Sales Journal to be posted.

It should be obvious, but I'll state it anyway. All customer invoices are recorded (posted) in the Sales Journal and the Customer's Account Receivable Subsidiary Ledger. At the end of a period (month), the totals from the Sales Journal are also recorded (posted) in the General Ledger Accounts.

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 and Credit Columns to record the amount of the transaction
    Our illustrated Sales Journal has Credit Amount Columns for Sales and Sales Tax Payable and a Debit Amount Column for Accounts Receivable Control.

Cash Receipts Journal

Definition & Purpose

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

The entries recorded in this journal are a debit to cash 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).

Cash Receipts Journal Page 1
Entry No. Date Customer Account
Name/Description
Post Ref. A/R
Credit
Acct-150
Sales
Credit
Acct-400
Other Credits GL-Account Post Ref. Amount
Credit
Cash
Debit
Acct-100
1 Jan 15, xxxx All Other Customers X 6000         6000
2 Jan 25, xxxx Honest Bob's Used Cars-Check Number 605 X 4000         4000
                   
CR-1 Jan 31, xxxx Totals For Month   10000         10000
        (X)         (X)

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 and Cash Sales.
  • 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.

Clicking on the yellow highlighted X illustrates that check number 605 was posted in the Cash Receipts Journal and also posted to the Accounts Receivable Subsidiary Ledger for Honest Bob's Used Cars. To return click on the yellow highlighted CR-1-2.

Clicking on the yellow highlighted CR-1 illustrates that the monthly total for January was posted to the General Ledger Accounts Receivable Control Account-150. To return click on the yellow highlighted CR-1.

Can you tell me what other General Ledger Account needs to be posted for the month of January that we didn't illustrate in our example ? How about that 100 Account in the Posting Reference Column ? That's right the General Ledger Cash Account also needs the January total from the Cash Receipts Journal to be posted.

It should be obvious, but I'll state it anyway. All customer checks are recorded (posted) in the Cash Receipts Journal and the Customer's Account Receivable Subsidiary Ledger. At the end of a period (month), the totals from the Cash Receipts Journal are also recorded (posted) in the General Ledger Accounts.

Special General Ledger Accounts-Control Accounts

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. Subsidiary Ledgers provide the detail information about what makes up the balance in the control account. Two of the most common Control Accounts are Accounts Receivable and Accounts Payable. After posting all transactions the balance of the Control Account and the sum of the detailed records in the 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.

Sample of a General Ledger Control Account- Accounts Receivable Control

Account Name:Accounts Receivable Control Account Number:150
Date Description Post Ref. Debit Credit Balance
Jan 1 Beg Bal.       45000
Jan 31   SJ-1 15000   60000
Jan 31   CR-1   10000 50000
Feb 28   SJ-2 17000   67000
Feb 28   CR-2   19000 48000
Mar 31   SJ-3 20000   68000
Mar 31   CR-3   25000 43000

Take a good look at our sample General Ledger Account Accounts Receivable Control. Only two entries one a debit and the other a credit have been recorded for the months of January, February, and March. One entry recorded the increase and had a SJ posting reference and the other recorded the decrease in the account and had a CR posting reference. What do you think the abbreviations-SJ and CR- stand for ? Of course, SJ stands for Sales Journal and CR stands for Cash Receipts Journal. The amounts posted were calculated by summing the amounts of all the entries made in the Sales Journal and Cash Receipts Journal for each month and posting one total amount.

Let's take a look at our two yellow highlighted Posting References. What do they tell us ? Where we got the information from. The SJ-1 means the information came from the Sales Journal and the number 1 means the months Summary Totals. The 1 stands for January. If we were posting February the reference number would be SJ-2. Click on the yellow highlighted SJ-1 above to see where the entry came from ? To return click on the yellow highlighted SJ-1 again.

What about the yellow highlighted CR-1 ? The same logic applies. The CR means the Cash Receipts Journal and the 1 stands for the months Summary Totals. In this case, January. Click on the yellow highlighted CR-1 above to see where the entry came from ? To return click on the yellow highlighted CR-1 again.

Subsidiary Accounts Receivable 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. The abbreviations SJ stands for Sales Journal and CR stands for Cash Receipts Journal.

Our Accounts Receivable Subsidiary Ledger

Name:Big Bob's Office Supply
Address:501 Anywhere St, Anywhere City, Anywhere State
Date Item Post Ref. Debit Credit Balance
Jan 4, xxxx Invoice # 5050 SJ-1-1 1000   1000
Name:Honest Bob's Used Cars
Address:502 Anywhere St, Anywhere City, Anywhere State
Date Item Post Ref. Debit Credit Balance
Jan 10, xxxx Invoice # 5051 SJ-1-2 4000   4000
Jan 25, xxxx Check # 605 CR-1-2   4000 0
Name:Super Flic Movies
Address:503 Anywhere St, Anywhere City, Anywhere State
Date Item Post Ref. Debit Credit Balance
Jan 18, xxxx Invoice # 5052 SJ-1-3 5000   5000
Name:Shaggy Dog Vet
Address:504 Anywhere St, Anywhere City, Anywhere State
Date Item Post Ref. Debit Credit Balance
Jan 25, xxxx Invoice # 5053 SJ-1-4 3000   3000
Name:Greasy Spoon
Address:505 Anywhere St, Anywhere City, Anywhere State
Date Item Post Ref. Debit Credit Balance
Jan 30, xxxx Invoice # 5054 SJ-1-5 2000   2000
Name:All Our Other Customers
Address:xxx Anywhere St, Anywhere City, Anywhere State
Date Item Post Ref. Debit Credit Balance
Jan 1, xxxx Beginning Balances       45000
Jan 31, xxxx Customer's Check Numbers CR-Various   6000 39000

Clicking on the yellow highlighted SJ-1-2 takes you to the Sales Journal and illustrates that the transaction has also been recorded there. Click on the yellow highlighted X to return.

Clicking on the yellow highlighted CR-1-2 takes you to the Cash Receipts Journal and illustrates that the transaction has also been recorded in the Cash Receipts Journal. Click on the yellow highlighted X to return.

More food for thought. We could if we wanted to combine our Cash Receipts and Sales Journals into one Special Journal just like we combined our Cash Disbursements and Purchases Journals. Your Journals can be "customized" to meet your specific business needs and ways of doing business. I use the term hybrid to refer to these customized journals. The journals I present and other tutorials and text books present are guides that you can use as is or modify to meet your own bookkeeping needs.

Combined Cash Receipts & Sales Journal- "Hybrid Journal"

Combined Cash Disbursements & Purchases Journal      Page 1
Entry No Cash Debit Ck. No. Date Description Post Ref A/R Debit A/R Credit Sales Credit Other Post Ref Debit Credit
                         
                         
                         
                         
                         

Ok, we did this in the previous lesson but this time we're going to identify the transactions that should be recorded in the Sales and Cash Receipts Journals. Remember my steps for recording and analyzing transactions ? If not, here they are again.

Bean Counter's seven simple steps (RUDUUDD) to analyze and record our transactions:

  1. Recognize that a transaction (event) has occurred and what source documents such as sales invoices (tickets), invoices from suppliers, contracts, checks written or checks received , provide documentation (proof) that a transaction has occurred.
  2. Understand how the transaction (event) affects the business-the type of transaction and whether it needs to be recorded in the formal bookkeeping records.
  3. Determine what accounts are affected and whether the transaction increases or decreases the account balance.
  4. Use the business's Chart of Accounts when necessary to determine the account numbers that represent these accounts.
  5. Use the debit and credit rules to determine if the accounts are debited or credited.
  6. Determine what Journal should be used to record the transaction.
  7. Do It-Record the transaction.

We'll use the same transactions and events for this exercise that we did for the exercise in the prior lesson.

Transactions and Events used for the following exercise:

  1. Big Shot, the owner, had us write him check number 5000 dated Dec 1, xxxx for $2500 to cover his personal expenses for the month.
  2. Prepared and sent our Purchase Order Number 9000 dated Dec 1, xxxx for 10 computers @ $500 each for a total of $5,000 to be delivered in 7 days from Wholesale Computers.
  3. We received invoice number 765 dated Dec 1,xxxx in the amount of $1000 from Our Local Daily for an advertisement to run for 4 weeks. Stated payment terms are Net 10.
  4. Prepared and sent our invoice number 1000 dated Dec 2, xxxx in the amount of $2000 for 2 computers delivered to Mom & Pop Shop. Stated payment terms are due upon receipt.
  5. Our owner Big Shot gave us his personal check number 235 dated Dec 5, xxxx in the amount of $20000 that was required in order to get a loan from Our Friendly Bank.
  6. Dec 6, xxxxx we received a notice from Our Friendly Bank that our company loan for $50000 to help expand our business was approved and had been deposited into our business checking account. Monthly payments to pay back the loan are $500 a month.
  7. Received invoice number 897 dated Dec 7, xxxx for $5000 from Wholesale Computers for our order of 10 computers @ $500. Stated payment terms are net 30. The computers have been received in good condition and checked in by our receiving department.
  8. Prepared and mailed our check number 5002 dated Dec 7, xxxx to Horrible Landlord Company for our monthly shop rental of $2000.
  9. Dec 7, xxx our Customer Needing Computers stopped by our shop and bought one of our computers. We prepared our invoice number 1001 dated Dec 7, xxxx in the amount of $1000 for 1 computer and gave him his copy. Stated payment terms are net 10.
  10. Received our monthly utility bill from Shock U Utilities dated Dec 8, xxxx for $1500. Stated payment terms are due upon receipt. Prepared and mailed our check number 5003 dated Dec 8, xxxx for $1500.
  11. Received invoice number 5432 dated Dec 9, xxxx for the amount of $500 from Speedy Office Supplies for office supplies delivered. Stated payment terms are net 30.
  12. Received invoice number 555 dated Dec 9, xxxx for $500 billed by our friendly, smart, helpful, handsome, debonair, accountant Dave Marshall from Bean Counter. Stated payment terms are due upon receipt. Prepared and mailed our check number 5004 dated Dec 9, xxxx for $500.
  13. Received monthly telephone bill for $300 dated Dec 9, xxxx from Reach Out & Touch. Stated payment terms are due upon receipt. Prepared and mailed our check number 5005 dated Dec 9, xxxx for $300.
  14. Prepared and mailed check number 5006 dated Dec 11, xxxx for $5000 paying invoice number 897 for the 10 computers received from Wholesale Computers. I know, don't tell, me we paid early- the stated payment terms were net 30 or due in 30 days.
  15. December 13, xxxx received our customer's check number 555 dated Dec 12, xxxx for $2000 from Mom & Pop Shop paying our invoice number 1000 for computers sold.
  16. Prepared and mailed our check number 5007 dated Dec 14, xxxx to Speedy Office Supply for $500 paying invoice number 5432.
  17. Dec 17, xxxx received check number 700 dated Dec 16, xxxx from our customer Needing Computers paying our invoice number 1001 for $1000.
  18. Billed our customer Newbie Needinghelp on our invoice number 1002 dated Dec 17, xxxx for $500 for training services we provided at their business. Terms granted were net 10.
  19. Dec 19, xxxx bought $50 worth of stamps while at the Post Office and wrote check number 5008 made out to the Postmaster.
  20. Dec 22, xxxx we picked up and bought 10 used computers for $1000 to sell to our customers from Not Junk Yet Computers. Not Junk presented us their invoice number 123111 dated Dec 22, xxxxx which we immediately paid with our check number 5009 dated Dec 22, xxxx since their terms are COD.
  21. Billed our customer Bean Counter on our invoice number 1003 dated Dec 22, xxxx $700 for our Advanced Computer Course. Terms granted were net 30.
  22. Dec 26,xxxx received check number 8532 for $250 dated Dec 20, xxxx from our customer Newbie Needinghelp making a partial payment on our invoice number 1002.
  23. After receiving a friendly reminder to pay call from Our Local Daily, prepared and mailed our check number 5010 dated Dec 27, xxxx for $1000 paying Our Local Daily for their invoice number 765 dated Dec 1, xxxx for advertising. Shame on us. We slipped up. The stated payment terms were net 10 which means if we had been on the ball we would have mailed a check on Dec 11, xxxxx.
  24. Billed our customer Know Itall on our invoice number 1004 dated Dec 26, xxxx $2700 for 2- computers @ $1000 each and our Advanced Computer Course @ $700. Terms granted were net 30.
  25. Dec 26, xxxx a walk in customer purchased 3 computers @ $700 ea. and gave us his check number 321 dated Dec 26, xxxx for $2100. We prepared and gave him his copy of our invoice number 1005 dated Dec 26, xxxx and prepared and gave him his copy of our receipt number 5080 for his proof of payment.
  26. Dec 29, xxxx we received a purchase order for 5 computers @ 800 each totalling $4000 from our customer Needing Computers to be delivered in 7 days.
  27. Dec 30, xxxx purchased and wrote check number 5011 for $15000 to Honest Bob's Carlot for a new delivery truck.
  28. Prepared and mailed our check number 5012 dated Dec 31, xxxx to Our Friendly Bank for $500 for the first payment due for our business loan. Note:Interest was 350 and principal was 150.
  29. Prepared and mailed our invoice number 1005 dated Dec 31, xxxx in the amount of $1200 for the sale of two computers to Fix It Daddy Repair Shop. In all our previous examples we've been ignoring sales or use tax. Not this time. Sales tax on the sale of the computers is at the rate of 10%. So our total invoice is 2-Computers @ $600=$1200 and sales tax of 120 (1200 x .10) for a total of $1320.

Since this lesson concentrates on the cash receipts and sales journals, our task now is to identify the above transactions that are recorded in either of these two journals.

Get you a piece of paper (scratch paper is fine) and a pen or pencil and make a list of the numbers of the above transactions that should be recorded in the Sales or Cash Receipts Journals and the reason why. Here's that tool again to help.

1.Did You Receive Cash ?
YES Record transaction in Cash Receipts Journal
  NO Answer question 2
2.Did you write a check ?
YES-a check was written Answer Question 2.(a)
    2.(a) Did you pay an employee for salary or wages earned ?  
    YES Record transaction in Payroll Journal
      NO Record transaction in Cash Disbursements Journal
  NO-a check was not written Answer Question 3.
3.Did you bill a product or service to a customer and grant credit (on account) ?
YES Record transaction in Sales / Accounts Receivable Journal
  NO Answer question 4
4.Did you incur an expense or purchase supplies, inventory, or an asset and the supplier granted you credit (on account) ?
YES Record transaction in Purchases / Accounts Payable Journal
  NO Looks Like the you need to record the entry in the General Journal

What questions in the table above apply to the Cash Receipts and Sales Journals ?
Question 1- Did you receive cash ?
and
Question 3-Did you bill a product or service customer and grant credit(on account) ?

For this exercise make three columns on your sheet of paper. The first column will contain the transaction number, the second the reason, and the third the journal to use to record the transaction.

Transaction Number Reason Journal To Use
4 Billed a product or service to a customer and granted credit (on account) Sales Journal
5 Received Cash Cash Receipts Journal
When finished click on How Did You Do ?

What transactions are not recorded in any of the "formal" journals ?

Transaction # 2-we sent out our Purchase Order # 9000 to our supplier.
Transaction # 26-we received our customer's Purchase Order ordering some more computers.

Remember not all transactions are recorded in the "formal" records immediately. Contracts, Purchase Orders, and Sales Orders are a few examples of information that a business keeps up with but that are not recorded in the formal journals until the sale or purchase is completed.

You guessed it ! You've got one more task to complete before we end this lesson. Get that paper and pencil again and prepare your Sales and Cash Receipts Journals.
Let's see if yours looks similar to mine. Click on My Journals

In this lesson, we recouped some of the money that we spent in the prior lesson. So far, believe it or not, we've covered quite a bit of ground. I hope my lessons haven't left anyone out in the cold. Hang in there, we've only got a few more left.

You must be living right. Due to the exercise we completed, you get to skate again-no quiz. Be forewarned, that doesn't mean you you don't need to be paying attention. I may not be so nice forever.

<--BACK        NEXT-->
Introduction Lesson 1 Lesson 2 Lesson 3 Lesson 4 Lesson 5 Lesson 6
Bean Counter