Making Journal Entries:
Cash Receipts & Sales Journal
Cash Disbursements Journal

Setting up a business's record keeping process is an extremely important step.  Accurate record keeping helps the business determine how well it is doing by keeping track of customer's charge accounts, sales records, expense records, cash records (checking account & petty cash), and as many records as is desired.  Accounts are a way of setting up a special way to keep track of different separate items.  An account might represent a company, it might represent a certain type of expense, or it might represent a certain group of assets (physical things owned).  Accounts usually have either a "DEBIT" balance or a "CREDIT" balance.  You will learn about DEBIT and CREDIT as you advance your learning in bookkeeping/accounting.   For now, just think of each account having a "positive" balance.   When you have to subtract from the balance, you would write it with a greater than/lesser than signs in front and back of the amount--for example <550.00> would mean that you are subtracting $550.00 from the balance.  In some computer programs (like Microsoft Works for the Macintosh) these are done with parenthesis--for example (550.00) would be the equivalent of <550.00>.  These show that you are subtracting this amount in the account.

As you increase your learning in bookkeeping/accounting, you will learn that businesses set up a chart of accounts wherein they assign a number for each account, and give the account a name.  When sales, charges, or expenses occur, the amount is recorded into its proper account number.   Accounts are identified by "families."  There is an Assets Family, a Liabilities Family, an Equity/Capital Family, an Income Family, and an Expenses Family.   For the present time, however, you will not need to worry about the account numbers, you will just worry about the NAME of the account.

When sales, charges, or expenses occur, the first recording is made in a journal.   WHEN MONEY IS PAID OUT, the journal used is a Cash Disbursements Journal.   WHEN MONEY COMES IN or a sale is charged to a customer, the journal used is a Cash Receipts and Sales Journal.  At the end of each month, account columns are totaled and the monthly total for each account is put into a Ledger which has a separate page for each account.  This way, each account is kept track of and by the end of the year, the exact amount of money going into each account is known.  Look at the examples below of a Cash Disbursements Journal and a Cash Receipts & Sales Journal.  Accounts Payable are people or companies that the business owes money to.  For instance, when you get loans or "charge" items (like a charge card), you set up an "account" with that company) and it becomes an "account payable" for your bookkeeping system.

CASH DISBURSEMENTS JOURNAL

CASH RECEIPTS & SALES JOURNAL

Did you notice that there are two places where each amount is entered?  If you pay sash out, you have to take it out of the cash account and also put it into the expense account to keep track of where the money was spent.  If cash or a sale comes in, the money has to go into the cash account and it has to be shown as a sale also.  When a charged sale is entered, the amount goes into accounts receivable and also into sales.   When a charge (accounts receivable) is paid, the amount has to be subtracted from accounts receivable, and of course, it is going into the cash fund.

Let's take a cash disbursement through the process of writing the check and entering it in the journal.  Sarah Jones has written a check for $147.58 for an Invoice Received.   This was a charged purchase so she would have entered the purchase to begin with an Account Payable.  Get the visual handout from Mr. Hanney.  Figure 1 shows how the check would be written.

Now the entry has to be made in the Cash Disbursements Journal.  It should look like this:

CASH DISBURSEMENTS JOURNAL

Notice that the $147.58 was entered in the Cash Account column and also again in the Accounts Payable column.

Now let's take a cash receipt & sale through the process.  We'll do both a regular sale, a charge sale, and an accounts receivable receipt.  The facts we'll use are that Wells Fargo Co. bought a bundle of lumber from John Doe for $775.00.   Miracle Construction Co. charged their lumber purchase for $1,298.90.  Weowe Lumber Company paid $7,667.24 on their account for previous purchase charged.  Notice how these items are entered below:

CASH RECEIPTS & SALES

The May 3rd sale to Miracle Construction Co. was a charge sale and therefore entered as an account to be received, or an account receivable.  The May 3rd cash received from Weowe Lumber Co. was a payment toward what they owed, so the amount had to be deducted in the accounts receivable column (the marks around the numbers show a negative entry).   EACH ENTRY IS PUT INTO TWO DIFFERENT COLUMNS.

At the end of each month, the amounts in each column in all journals are totaled and the totals are posted (entered) in a "ledger" where each separate account has its own page showing monthly additions during the year and an account balance.  (You will not have to worry about making ledger entries during this job).

When a deposit is made, the left back of the check is "endorsed" (signed or stamped) to show that the company is depositing it and that the same person or company that received it is depositing it.  An example of an endorsed check and different types of deposit slips are shown on Figure 2 of the visual handout.

Most deposit slips have a form on the back of them to use when there are several checks that need to be listed for deposit.  If only a few checks are deposited, the front side of the deposit slip can be used, but when more space is needed, the back side is used instead of the front side.

When a deposit is made, it must be shown in the Cash Receipts & Sales Journal and the Cash Disbursements Journal by writing the date, the word "Deposit" and the amount of the deposit in the "Explanation" column.  A deposit should be shown both in the Cash Receipts & Sales Journal and the Cash Disbursements Journal as follows:

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