Details of all receipts should be recorded in the accounting records.
The first step is to make a produce a cash record - this may even be transaction summary obtained from the bank of transactions which have been processed through the bank account.
Many businesses find it more convenient to maintain separate records of cash receipts and payments. The purpose of a cash receipts records is to record:
Each receipt from a credit customer must be recorded individually. Receipts from cash sales can be recorded as a total. The cash receipts records should be updated regularly, perhaps every day in large businesses.
A cash receipts record will contain several columns, typically as follows:
| Date | Reference | Total $ | Receivables $ | Cash sales $ | Sales tax $ | Other $ |
|---|
Details of receipts are entered in the cash receipts record as follows:
This is the date the money is received.
This could be one column or several columns. It is needed to identify who the receipt is from or what it is for.
The details in the reference column usually indicate the other part of the double entry to record the transaction in the accounting system. For example if the cash receipts are from sales the details should read 'sales'.
The total amount of the receipt is entered in the total column.
The remaining columns are for further analysis and should be appropriate to the business.
If the receipt is from a credit customer, the total amount of the receipt should be entered in the receivables column. There is no need to split this amount between the net sale value and sales tax. The sales tax on a credit sale was recorded earlier when the sales invoice is raised and recorded in the accounting records.
If the receipt is for cash sales, the total amount received is shown in the total column. if the business is registered to account for sales tax, the cash sales column is used to record the amount of the sales excluding sales tax as sales tax has not yet been accounted for on these transactions. If the business is not registered to account for sales tax, the total receipts relating to cash sales should be recorded in this column.
This column is used to record any sales tax received for anything other than credit sales invoices. If the business is registered to account for sales tax, the cash sales column should show the amount of the sale excluding sales tax and the tax on the sale should be shown in the sales tax column. The amount in this column and the amount in the cash sales column agree to the amount in the total column.
The reason for recording the sales tax on receipts from cash sales (and on other sources of income, if any) is that sales tax is recorded for the first time in the accounting system at this point.
This is illustrated in the example below.
A business may occasionally receive money from other sources, such as interest on a bank deposit account, or receipt of cash from a bank loan. If other receipts are uncommon, a single column may be used to record them, and the Reference column will be used to explain the nature of the receipt.
On each row of the cash receipts record, the figure in the total column should agree to the sum of the amounts in the receivables, cash sales, sales tax and any other columns used.
The following amounts were received on 19 October 20X6.
(a) Payment of invoice number 69 by BL Lorries (account number S239), total $4,700.
(b) Payment of invoice number 70 by MA Meters (account number S314), total $2,820.
(c) Payment of invoice number 78 by Tanktop Limited (account number S205), total $3,100.
(d) A cash sale of $1,200 including sales tax at 20%.
Write up the cash receipts record and total each of the columns.
| Date | Reference | Total $ | Rec'bles $ | Cash sales $ | Sales tax $ |
|---|---|---|---|---|---|
| 19.10.X6 | BL Lorries, a/c $239 | 4,700 | 4,700 | ||
| MA Meters, a/c S314 | 2,820 | 2,820 | |||
| Tanktop Ltd, a/c S205 | 3,100 | 3,100 | |||
| Cash sale | 1,200 | 1,000 | 200 | ||
| 11,820 | 10,620 | 1,000 | 200 | ||
| G/L ref |
Notes
1. In a manual accounting system, each page in the cash receipts record is normally numbered sequentially, for reference purposes. In a computerised system, there is likely to be a similar sequential reference. The page number is referred to as its 'folio' number. Here, the page of the record has been given an imaginary folio number of CR14.
2. Cash sale. Sales tax = $1,200 x (20/120) = $200. The value of the cash sale to the business is $1,200 x (100/120) = $1,000. These are the figures entered in the sales tax and cash sales columns, and together they match the amount of $1,200 for that item in the total column.
3. Receipts entered in the cash receipts record should be banked intact in order to reduce the risk of fraud or error. If the business needs cash for petty cash payments then it should cash a cheque. Most receipts are likely to be in the form of cheques and electronic or automated receipts.
4. The cash receipts record should include general ledger account references to identify which general ledger accounts have been updated when the transactions have been processed. In addition, for receipts from credit customers, there will also be a receivables ledger reference to update the memorandum only individual receivables ledger accounts.
The following remittance list has been prepared showing receipts for 1 June:
| Customer name | Account number | Amount received $ |
|---|---|---|
| A C Bhatt | 1037 | 265.40 |
| Flowers Limited | 1002 | 319.64 |
| E Murphy | 1053 | 396.61 |
| P Taylor | 1025 | 236.98 |
| F Willis | 1129 | 326.89 |
| Young Fashions | 1042 | 115.79 |
| Perry & Co | 1079 | 163.26 |
| L Connor Limited | 1023 | 115.37 |
| O McGovern | 1152 | 327.36 |
| J Shepard | 1116 | 372.45 |
| Cole and Porter | 1014 | 325.67 |
| P Smith | 1046 | 235.89 |
| D Smith | 1103 | 117.80 |
The summary information from the cash register printout for 1 June was as follows:
| Totals | $ |
|---|---|
| Cash | 1,151.50 |
| Cheques | 513.71 |
| Credit/debit card (agreed to end of day reconciliation) | 815.74 |
| 2,480.95 |
These details agree with the amount of cash, cheques and card vouchers in the till.
Sales tax within cash register receipts amounts to $413.49.
Enter these amounts in the cash receipts record.
For a suggested answer, see the 'Answers' section at the end of the book.
The records for a business show the following for 20 April
| Cash | Cheques | Credit/debit cards | ||
|---|---|---|---|---|
| Cash register receipts | 441.68 | 227.44 | 129.79 | 798.91 |
The sales tax in the cash receipts amounts to $133.15
Cheques received in the post from credit customers were as follows:
Value of cheque from D Middleton, account 5469 = 884.84
Record this information in the cash receipts record and then post the totals to the relevant accounts.
For a suggested answer, see the 'Answers' section at the end of the book
Many businesses receive cash directly into their bank accounts, by means of
In such cases, the business may not know about the receipt until it receives a bank statement or a listing of receipts from the bank, although the customer is likely to send a notification of payment when paying by BACS.
If the bank statement contains previously unidentified receipts, the procedures are much the same as described already for receipts by cheque.
Check that the correct amount has been paid. The bank statement should give some information to help with identifying who the money has come from
Enter the amounts received in the cash receipts record on the date you are aware of the items.
Post the totals from the cash receipts record to the relevant accounts in the general ledger.