A cash receipts journal is a special record used in accounting, usually by retailers. It involves recording the details of sales in a specific manner. In turn, the cash receipts journal gathers together the relevant information in a way that makes it easier to copy across, in aggregate, to traditional double-entry accounts.
Most company accounts are prepared using the double-entry basis. This works around the concept that every transaction is an exchange and thus affects a company's overall wealth in two ways. For example, when a retailer sells a book, its cash balance increased by the purchase price, while the value of its overall stock decreases.
To take account of this, each transaction is listed in two separate columns in the accounts. One element of the transaction is listed as a debit, and the other as a credit. This also performs an administrative function as, over any period of time, the totals for the debit and credit columns should be identical. Where they do not match, the usual explanation is that a listing or mathematical error has been made. Regular checking in this way can catch errors and make them easier to find than if they were left until the end of a full accounting period.
The main drawback to double-entry accounting is that it can be too complicated to carry out every day, particularly in set-ups where there is a specialist accountant who is not on hand for the actual retailing side of the business. This can be the case with a small business, where the proprietor uses an external accountant, or with a large business, where an accountant works from a central office of a company with multiple retail outlets.
The solution to this problem is a series of documents known as books of prime entry or books of original entry. These are documents that can be used to easily record financial data for the first time, for example by a store manager at the end of each day, working from till receipts. Examples include books dealing with bank transactions, and purchases from suppliers.
One of these books of prime entry is the cash receipts journal. This covers each sales transaction that is on a cash basis. In this context, cash means the payment is immediate rather than on credit; it can cover payment in physical coins, debit or credit cards, and checks. As well as listing the details of each transaction, the cash receipts journal will also list details such as discounts given to a customer against the standard retail price. This can be important, as firms will often value their existing stock based on its expected final sale price, and this valuation will assume the full retail price will be received.