Cash Receipts, Cash Payments, and Banking Procedures Chapter 9 Cash Receipts, Cash Payments, and Banking Procedures Section 1: Cash Receipts Section Objectives The third objective of the chapter is to illustrate how to post from the cash receipts journal to subsidiary and general ledgers. Record cash receipts in a cash receipts journal. Account for cash short or over. Post from the cash receipts journal to subsidiary and general ledgers. McGraw-Hill © 2007 The McGraw-Hill Companies, Inc. All rights reserved.

Posting from the Cash Receipts Journal A business must maintain an adequate cash flow (cash receipts less cash payments).

Post from the cash receipts journal to subsidiary and general ledgers. Objective 3 Post from the cash receipts journal to subsidiary and general ledgers. Posting occurs on a summary basis at the end of the month for all columns except the Other Accounts Credit column. If subsidiary accounts are affected, then they are updated daily.

Posting the Column Totals At the end of the month, the cash receipts journal is totaled and the equality of debits and credits is proved. Column totals are posted at the end of the month.

Debits and credits are equal. PROOF OF CASH RECEIPTS JOURNAL Debits Cash Debit column $42,342.00 Debits and credits are equal. Credits Accounts Receivable Credit column $ 2133.00 Sales Tax Payable Credit column 1,800.00 Sales Credit column 22,500.00 Other Accounts Credit column 15,909.00 Total credits $42,342.00 Before posting make sure that total debits and total credits are equal.

The column totals are posted to the general ledger. CASH RECEIPTS JOURNAL PAGE 1 The total of the $2,133 is posted at the end of the month to the Accounts Receivable account in the general ledger. Sales Tax Payable, Sales and Cash column totals are also posted at the end of the month.

The amounts in the Other Accounts Credit section are posted. CASH RECEIPTS JOURNAL PAGE 1 The (X) indicates that the individual amounts are posted, and not the total. Whenever an entry is made in the Other Accounts Credit column, the transaction must be posted to the General Ledger on the same day so no posting of the column total is necessary at the end of the month.

Posting to the Accounts Receivable Ledger Post entries from the Accounts Receivable Credit column to the customers’ accounts in the accounts receivable subsidiary ledger daily. Subsidiary ledgers must be updated on a daily basis.

On January 7, $432.00 was posted to Roy Anderson’s account in the accounts receivable subsidiary ledger. Let’s see how the subsidiary ledger is updated for a customer payment.

CASH RECEIPTS JOURNAL PAGE 1 SALES DATE DESCRIPTION POST. ACCOUNTS TAX SALES OTHER ACCOUNTS CREDIT CASH REF. RECEIVABLE PAYABLE CREDIT ACCOUNT TITLE POST. AMT. DEBIT CREDIT CREDIT REF. 20-- Jan. 7 R. Anderson  432.00 432.00 The “CR1” indicates that the transaction appears on page 1 of the cash receipts journal. Name Roy Anderson Terms n/30 Address 8913 S. Hampton Rd, Dallas, Texas 75232-6002 DATE DESCRIPTION POST. DEBIT CREDIT BALANCE REF. 20-- Jan. 1 Balance  432.00 3 Sales Slip 1101 S1 432.00 864.00 7 CR1 432.00 432.00 31 Sales Slip 1110 S1 267.50 699.50 Notice that CR1 indicates that the transaction appears on page 1 of the cash receipts journal.

CASH RECEIPTS JOURNAL PAGE 1 SALES DATE DESCRIPTION POST. ACCOUNTS TAX SALES OTHER ACCOUNTS CREDIT CASH REF. RECEIVABLE PAYABLE CREDIT ACCOUNT TITLE POST. AMT. DEBIT CREDIT CREDIT REF. 20-- Jan. 7 R. Anderson  432.00 432.00 The “CR1” indicates that the transaction appears on page 1 of the cash receipts journal. Name Roy Anderson Terms n/30 Address 8913 S. Hampton Rd, Dallas, Texas 75232-6002 DATE DESCRIPTION POST. DEBIT CREDIT BALANCE REF. 20-- Jan. 1 Balance  432.00 3 Sales Slip 1101 S1 432.00 864.00 7 CR1 432.00 432.00 31 Sales Slip 1110 S1 267.50 699.50 The $432 payment reduces the customer’s account in the subsidiary ledger.

CASH RECEIPTS JOURNAL PAGE 1 SALES DATE DESCRIPTION POST. ACCOUNTS TAX SALES OTHER ACCOUNTS CREDIT CASH REF. RECEIVABLE PAYABLE CREDIT ACCOUNT TITLE POST. AMT. DEBIT CREDIT CREDIT REF. 20-- Jan. 7 R. Anderson  432.00 432.00 The “CR1” indicates that the transaction appears on page 1 of the cash receipts journal. Name Roy Anderson Terms n/30 Address 8913 S. Hampton Rd, Dallas, Texas 75232-6002 DATE DESCRIPTION POST. DEBIT CREDIT BALANCE REF. 20-- Jan. 1 Balance  432.00 3 Sales Slip 1101 S1 432.00 864.00 7 CR1 432.00 432.00 31 Sales Slip 1110 S1 267.50 699.50 Make sure to put a check mark in the posting reference column of the cash receipts journal after the subsidiary account has been updated.

Advantages of the Cash Receipts Journal A business must maintain an adequate cash flow (cash receipts less cash payments).

Saves time and effort when recording and posting cash receipts The cash receipts journal: Saves time and effort when recording and posting cash receipts Allows for the division of work among the accounting staff Strengthens the audit trail by recording all cash receipts transactions in one place It saves time, effort, and recording space, permits the division of labor and strengthens the audit trail.

Complete the following sentences: SECTION R E V I W Complete the following sentences: The __________________ is a special journal used to record and post transactions involving the receipt of cash. cash receipts journal Cash refers to currency, coins, checks, money orders, and _______________ ________. funds on deposit in a bank Let’s review. . . A cash receipts journal will always include a __________ column. Cash Debit

Complete the following sentences: R E V I W SECTION Complete the following sentences: A(n) __________________ is a form sent to a firm’s customers showing transactions during the month and the balance owed. statement of account The ______________ is used to handle payments involving small amounts of money. petty cash fund promissory note A(n) ______________ is a written promise to pay a specified amount of money on a specific date.

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