Introduction to Journals and the Cash Receipts Journal

JOURNALS AS BOOKS OF FIRST ENTRY

• Journals represent the 3rd step in the accounting cycle, used to summarize source documents efficiently.

• They are known as "Books of First Entry" because this is where transactions are first recorded in a company's financial records.

CASH RECEIPTS AND PAYMENTS JOURNALS

• Cash Receipts Journal (CRJ): Records all cash received and banked (deposited).

• Cash Payments Journal (CPJ): Records all EFT and other payments that reduce funds in the bank.

SOURCE DOCUMENTS

• For the CRJ: Duplicate Receipts, Cash Register Rolls ($CRR$), and Bank Statements ($BS$).

• For the CPJ: EFT Payment Authorisations and Bank Statements ($BS$).

STRUCTURE OF THE CASH RECEIPTS JOURNAL (CRJ)

• Heading: Includes the journal name, business name (e.g., Maggie Carpet Cleaning), month, and year (e.g., May $2020$).

• Folio Number: (e.g., CRJ1) Used as a reference for the next cycle step.

• Analysis of Receipts Column: Used to enter individual amounts received during the day before they are banked.

• Bank Column: Records the total amount deposited into the bank account on a specific day.

• Current Income Column: Specifically for regular income like "Service Fees" in a service enterprise.

• Sundry Accounts: Reserved for irregular receipts (e.g., Capital, Rent Income, Commission Income). Includes columns for Amount, Folio, and Details (reason for receipt).

RECORDING AND TOTALING RULES

• Direct Deposits: Items deposited directly into the bank (e.g., Capital deposited by owner or Interest on Current Account from Sun Bank) bypass the Analysis of Receipts column.

• Service Fees: Since there are often many small transactions, the Details column simply lists "Service Fees" rather than individual names.

• Casting (Totaling): All columns except Analysis of Receipts are totaled vertically at month-end.

• Verification Formula: $\\text{Total Bank Column} = \\text{Total Current Income} + \\text{Total Sundry Accounts}$

CASE STUDY DATA: DRYDON DRY CLEANERS (MARCH 2020)

• March 02: $P.\,Drydon$ deposited $R450\\,000$ capital directly (Receipt no. 1).

• March 09: Service fees per cash register roll no. 1: $R13\\,500$.

• March 24: Rent from $S.\,Malan$ ($R600$) and Service fees ($R800$). Total deposit: $R1\\,400$.

• March 28: Service fees ($R4\\,000$) and Commission from Alfa Agency ($R2\\,000$). Total deposit: $R6\\,000$.

• March 31: Interest on current account from Sun Bank: $R120$.

• Final Totals:

  • Bank: $R482\\,020$

  • Current Income: $R27\\,300$

  • Sundry Accounts: $R454\\,720$