Summary LU4-6

Learning Unit 4: Recording Cash Transactions

4.1) Cash flow and your business:

 Main business purpose = profit
 Adequate, effective and efficient cash flow in business is important.
 Businesses fail due to lack of cash flow management, and falling into the ‘liquidity trap’.

4.2) Introducing Journals:

Name of Journal Abbreviation Type of transaction Source document used to
make an entry into the
journal
1. Cashbook CBR/CRJ Transactions that increase DUPLICATE:
Receipts/Cash the bank balance  Cash slip/cash
Receipts Journal register roll
 Cash invoice
 Receipt
 Bank deposit slip
(supporting
document).
2. Cashbook CBP/CPJ Transactions that decrease  Cheque counterfoil
Payments/Cash the bank balance  EFT confirmation
Payments slip
Journal  Original invoice,
cash slip, or receipt
(supporting
documents).
3. Petty Cash PCJ Purchases from the petty  Petty cash voucher
Journal cash box  Original invoice,
cash slip, or receipt
(supporting
documents).
4. Creditors CJ Credit purchases of Original credit invoice (tax
Journal products/services invoice with payment
terms).
5. Creditors CAJ Returns/rebates with CJ Original credit note.
Allowances transactions
Journal
6. Debtors Journal DJ Credit sales of only Duplicate credit invoice (tax
inventory invoice with payment
terms).
7. Debtors DAJ Returns/rebates with DJ Duplicate credit note.
Allowances transactions
Journal
8. General Journal GJ Sundry transactions that are Journal voucher.
not entered in the above 7
journals


4.3) The Cash Journals:

The CBP, CBR, and PCJ are the journals used by accountants and bookkeepers to record business cash
flow. CBR records cash inflows, whereas the CBP and PCJ record cash outflows. It is important for
businesses to record all cash inflows and outflows via their business bank account.

DR. Bank Account (ASSET) CR.

, Total cash receipts (+) Total cash Payments (-)

First recorded in the CBR * First recorded in CBP and PCJ *




*Books of first entry i.e. journals into which source documents are recorded/summarized.

4.3.1) Defining Cash Transactions:

A cash transaction is a transaction that is settled at the point of sale i.e. neither party owes the other after
the transactions has taken place.

 Cash receipts transactions. Transactions that bring about an increase in the bank balance, and
all are recorded in the cashbook receipts (CBP).
 Cash payments transactions. Transactions that bring about a decrease in the bank balance, as
well as a decrease in the petty cash on hand. All payments are recorded in the cashbook
payments (CBP), or petty cash journal (PCJ).

4.3.2) The cashbook receipts (CBR):

Examples of CBR transactions:

 Capital contributions made by the owner through a deposit into the business account.
 Business receiving money via cash sales, or services rendered.
 Rent income from tenants
 Interest income on bank account.
 Money received from debtors.

Cashbook receipts of… (BUSINESS NAME) for the month of… (e.g. May) CBR… (Journal number)

Doc. Day Details Fol Analysis Bank Output Services Sales
No. . of receipts VAT rendered
1 2 3 4 5 6 7 8 9


Sundry Accounts Cost of
Amount Fol. Details Sales
10 11 12 13


1- The number of the source document (duplicate receipt, duplicate cash invoice or cash register
roll).
2- The day the transaction took place.
3- The money whom the money was received from. In the case of Sales or Services rendered,
simply state ‘cash sales’, or ‘services rendered’.
4- Only used when a debtor settles their account
5- Known as the ‘till’ column. Amounts that pass through the cash register will be recorded here, and
total amounts as per bank deposit slips will be shown in the bank column.
6- The main column, the VAT inclusive amount is recorded here.

7-9 These columns are created for businesses regular cash receipts transactions. If a business isn’t a
VAT vendor, there will be no Output VAT column.