Accounting for Sales & Cash Receipts

Sales and cash receipts drive the success of any business. The business needs sales to bring in money, build profits and fund future growth. Cash receipts follow the sale and represent payments made by customers. Companies also receive cash payments for purchase returns. The accounting staff record the sales and cash receipt transactions for the business.

Journalizing Sales

Companies sell products or services in two ways, either for cash or for a promise of future payment. These transactions can be recorded in the general journal. Accountants use a general journal to record all financial transactions that are not recorded anywhere else.

The general journal includes three main columns. The first is labeled "Description," the second is labeled "Debit," and the third is labeled "Credit." If a customer pays cash at the time of sale, the accountant records the transaction in the general journal by writing "Cash" in the "Description" column and the dollar amount in the "Debit" column. On the next row, the accountant writes "Sales" in the "Description" column and the dollar amount under "Credit."

If the customer promises to pay in the future for the product or service being sold, the accountant writes Accounts Receivable in the Desciption column and the dollar amount in the Debit column. On the next row, the accountant writes Sales in the Description column and the dollar amount in the Credit colum.

Sales Journal

For recurring sales entries on account, some companies use a subsidiary journal specific to this purpose. A subsidiary journal simplifies the recording of entries that use the same accounts for each entry. The date is recorded in the first column of the sales journal and the customer name in the second. The sales journal includes only one column for recording the dollar amount of the transaction. The dollar amount entered in this column represents a debit to "Accounts Receivable" and a credit to "Sales."

Journalizing Cash Receipts

When a company receives cash payments for sales or as payments of money owed, the payments are recorded in the general journal if no subsidiary journal exists. The accountant records a debit to "Cash" regardless of the purpose of the payment. If the cash payment is for a sale, the accountant records a credit to "Sales." If the cash payment is for payment of money owed, the accountant records a credit to "Accounts Receivable."

Cash Receipts Journal

For recurring cash receipt entries, some companies use a subsidiary journal specific to this purpose. The cash receipts journal, or the subsidiary journal for cash receipts, works similar to the sales journal. The accountant records the date in the first column. If the receipt is for payment of money owed, the customer name is recorded in the second column. If the receipt is for another purpose, a description is recorded in the second column. The cash receipts journal includes three columns for recording the dollar amounts of the transaction. One column, labeled "Cash Debit" is used to record the amount of cash received. Another column labeled "Accounts Receivable Credit" is used to record the amount paid on money owed. A third column labeled "Other Credit" is used to enter the amount of the transaction.

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