Recording money received in the Cash Receipts Journal

One book for every rand that comes in

A small business receives money often. A customer pays for a repair, a tenant pays rent, the owner puts in more of her own money. If you wrote out a full double entry for each of those, you would write the word Bank hundreds of times a month and post hundreds of separate amounts to the ledger.

So we do the sensible thing. Every receipt for the month goes into one book, in date order: the Cash Receipts Journal, written CRJ.

Think about the effect before the label

Start with what actually happened to the business, not with the words debit and credit.

When the business receives money, the amount of money the business controls goes up. Money in the bank is something the business owns, so it is an asset. Assets increase on the debit side. That is why every single line in the CRJ debits Bank. No exceptions: if it is in the CRJ, the bank balance grew.

The interesting question is the second one: why did the money come in? The answer to that gives you the credit.

Notice the last row. That one is not income. The income was recorded on the day the work was done. When the debtor pays, the business simply exchanges a debt owed to it for cash.

What the CRJ looks like

The CRJ has a Bank column, then an analysis column for whatever the business receives most often, then a Sundry accounts column for the once-off items. A repair shop earns fees nearly every day, so it gets a Current income column. Anything unusual goes into Sundry, where you must write the name of the account next to the amount.

The source document tells you what to record. A receipt (a numbered duplicate book) is written when someone hands over money directly. A cash register roll summarises a day of small over-the-counter sales. An EFT notification or bank statement entry proves an electronic deposit landed.

Worked example. Thabo Mokoena runs Mokoena Cycle Repairs in Polokwane. These four receipts happened in March.

1. 1 March, Receipt 001, R48 000. Thabo deposits his own savings to start the business. The business now has R48 000 in the bank it did not have before, so Bank is debited R48 000. The owner's claim on the business is now R48 000, so Capital is credited. In the CRJ this sits in the Sundry accounts column, with "Capital" written beside it, because it happens once.
2. 4 March, cash register roll, R3 250. A week of repairs paid for in cash. Bank is debited R3 250 and Current income is credited R3 250. This is the everyday item, so it goes in the Current income analysis column.
3. 9 March, Receipt 002, R2 400. A tenant pays rent for the back room. Bank is debited R2 400, Rent income is credited. Rent income is not what the business is mainly there to do, so it goes in Sundry accounts.
4. 15 March, cash register roll, R4 100. More repairs. Bank debited, Current income credited, straight into the analysis column.

At month end Thabo adds the columns down. Bank = 48 000 + 3 250 + 2 400 + 4 100 = R57 750. Current income = 3 250 + 4 100 = R7 350. Sundry = 48 000 + 2 400 = R50 400.

Then he checks himself: 7 350 + 50 400 = 57 750. The analysis columns add across to the Bank column, so nothing was dropped or double counted.

Core checkpoint: given any receipt, you can say three things without hesitating. First, Bank is debited with the full amount, because the asset grew. Second, which account is credited and why (earned, owner's money, or a debt being settled). Third, whether the amount belongs in the analysis column or in Sundry accounts.