Cash Receipts Journal Revision Notes for Grade 10 NSC Matric Accounting

Cash Receipts Journal

What is a cash receipts journal?

The cash receipts journal (CRJ) is a subsidiary book used by a business to record all money received during a specific period. This journal helps track various sources of income, including cash sales, payments from debtors, and other receipts like interest or capital contributions. By keeping detailed records in the CRJ, a sole trader can monitor cash flow and maintain accurate financial records.

infoNote

The cash receipts journal is one of several subsidiary books used in accounting. While it specifically records money received, other subsidiary books (like the cash payments journal) record money paid out. Together, these books provide a complete picture of the business's cash flow.

The cash receipts journal is organised into multiple columns, each serving a specific purpose in recording and categorising the money received. Understanding each column's function is essential for accurate bookkeeping.

Structure and format of the cash receipts journal

A properly formatted cash receipts journal contains the following components:

Heading and reference information

The journal begins with important identifying information at the top. The heading includes the name of the subsidiary journal (Cash Receipts Journal), the business name, and the month for which the journal is prepared. Additionally, a folio reference number is included, which identifies the specific page of the Cash Receipts Journal being used.

Date and source documentation

Each entry in the journal records specific transaction details. The document number column (Doc) shows the source document reference number, which is the receipt number issued when money is received. The day column indicates the specific date of the transaction within the month shown in the heading.

Transaction details

The details column provides a description of where the money came from or what type of receipt it is. This might include the name of a debtor who paid their account, a description of cash sales, or other sources of income.

Folio column

The folio (Fol) column serves two important purposes depending on the transaction type. For debtor payments, it contains the folio number indicating which account in the debtors' ledger will be updated. For other transactions, it shows the folio number indicating which account in the general ledger will be posted to.

Analysis column

The analysis of receipts column breaks down individual amounts received as separate line items. This column shows the detailed breakdown of each individual receipt, helping to identify exactly how much was received from each source.

Bank column

The bank column is crucial as it records the total amount actually deposited into the business's bank account for each transaction. This represents the actual cash received and banked on that specific day. The amount shown here is what increases the business's bank balance.

chatImportant

The bank column is the most important column in the CRJ because it shows the actual cash received. Every transaction recorded in the CRJ must have an entry in the bank column, as the purpose of this journal is to record money received.

Sales tracking

The sales column specifically records the selling price of trading stock (merchandise) sold for cash. This column helps track cash sales revenue separate from credit sales. It's important to note that this only includes sales made for immediate cash payment, not sales on credit.

Cost of sales column

Although no actual cash transaction occurs for this column, the cost of sales column records the original purchase price (cost price) of the trading stock that was sold for cash. This is a non-cash entry included in the CRJ to allow regular updates to the trading stock account. By recording both the selling price and cost price, the business can track inventory movement and calculate gross profit.

Debtors' control

The debtors' control column shows amounts received from debtors (customers who owed money). This column records the total amount that will be credited to (decrease) the debtors' control account. The amount shown here includes both the cash actually received plus any discount allowed to the debtor.

For each individual debtor who makes a payment, a separate account must be maintained in the debtors' ledger. The folio number in the folio column indicates which specific debtor's account will be updated.

Discount allowed

The discount allowed column records reductions given to debtors as an incentive for early payment. This is also a non-cash item, but it's included in the CRJ to track discounts given to customers. When a debtor pays early and receives a discount, the business records the discount here even though no cash is received for it.

Sundry accounts

The sundry accounts section consists of three sub-columns: amount, folio, and details. This section is used for transactions that don't fit into the specific columns already provided. The amount sub-column shows the value received, the folio sub-column indicates which general ledger account will be posted to, and the details sub-column describes what the account represents.

infoNote

The sundry accounts section is flexible and accommodates any receipt that doesn't fit into the standard columns. Common entries include capital contributions from the owner, rent income received, interest income, and recoveries of bad debts.

Understanding key calculations

Calculating selling price and cost of sales

When a business sells goods, there's a relationship between the cost price (what the business paid), the profit margin (the markup percentage), and the selling price (what customers pay). Understanding these calculations is essential for completing the CRJ correctly.

The fundamental formula:

$\text{Cost price} + \text{Profit} = \text{Selling price}$

Or in abbreviated form: $\text{CP} + \text{P} = \text{SP}$

When working with percentages, always set the cost price equal to 100%. The profit margin percentage is then added to this 100% to find the selling price percentage.

chatImportant

The Golden Rule for Calculations:

The amount you're looking for always goes on top (becomes the numerator of the fraction). The known price goes on the bottom (denominator), and you multiply by the amount given.

This golden rule is essential for solving any selling price, cost price, or profit margin calculation correctly.

lightbulbExample

Worked Example 1: Finding Cost Price

Given: A business sells goods for R24 000 and the profit margin is 50%. Find the cost price.

Solution:

Step 1: Set up the percentage relationship

Cost price = 100%
Profit margin = 50%
Therefore, Selling price = 100% + 50% = 150%

Step 2: Apply the golden rule We want to find the cost price (CP), so CP goes on top:

$\frac{\text{CP}\%}{\text{SP}\%} \times \text{Amount} = \frac{100}{150} \times \text{R}24\,000 = \text{R}16\,000$

Answer: The cost price is R16 000.

lightbulbExample

Worked Example 2: Finding Selling Price

Given: A business purchases goods for R30 000 and the profit margin is 25%. Find the selling price.

Solution:

Step 1: Set up the percentage relationship

Cost price = 100%
Profit margin = 25%
Therefore, Selling price = 100% + 25% = 125%

Step 2: Apply the golden rule We want to find the selling price (SP), so SP goes on top:

$\frac{\text{SP}\%}{\text{CP}\%} \times \text{Amount} = \frac{125}{100} \times \text{R}30\,000 = \text{R}37\,500$

Answer: The selling price is R37 500.

lightbulbExample

Worked Example 3: Calculating Profit Margin from Given Prices

Given: A business sells goods for R60 000 and the cost price is R40 000. Find the profit margin percentage.

Solution:

Step 1: Determine the selling price percentage by working backwards

$\frac{\text{R}60\,000}{\text{R}40\,000} \times 100 = 150\%$

This means the selling price represents 150% of the cost price.

Step 2: Calculate the profit margin

Since cost price = 100%, the profit margin = 150% - 100% = 50%

Answer: The profit margin is 50%.

infoNote

Exam Tip: Always remember that the cost price percentage is 100%. Add the profit margin percentage to get the selling price percentage. Show your working clearly in exams to ensure you receive full marks even if your final answer is incorrect.

Special transactions in the cash receipts journal

Discount allowed to debtors

When debtors pay their accounts early, businesses often offer a discount as an incentive. This creates a special relationship between three amounts in the CRJ.

chatImportant

Key Formulas for Discount Calculations:

$\text{Bank} + \text{Discount allowed} = \text{Debtors' control}$

$\text{Debtors' control} - \text{Discount allowed} = \text{Bank}$

$\text{Debtors' control} - \text{Bank} = \text{Discount allowed}$

These formulas help you calculate any missing figure when you know the other two amounts. Memorise this relationship as it appears frequently in exams.

lightbulbExample

Example 1: Simple Discount Calculation

Given: A business receives R180 from R. Fourie in settlement of their account of R200.

Solution:

Bank received: R180
Debtors' control (original amount owed): R200
Discount allowed: R200 - R180 = R20

lightbulbExample

Example 2: Percentage Discount Calculation

Given: A business receives a cheque from R. Ndlovu after allowing a 5% discount. R. Ndlovu owes R2 400.

Solution:

Step 1: Calculate the discount amount

$5\% \text{ of R}2\,400 = \text{R}120$

Step 2: Calculate the bank amount

$\text{R}2\,400 - \text{R}120 = \text{R}2\,280$

Answer:

Bank received: R2 280
Debtors' control: R2 400
Discount allowed: R120

Understanding the accounting treatment:

When discount is allowed, the debtors' control account is credited (decreased) by the full amount owed, but the bank account only increases by the amount actually received. The difference is recorded as discount allowed, which is an expense for the business.

infoNote

Discount allowed is shown as a separate column in the CRJ even though no cash is received for it. This non-cash entry ensures that the debtors' control account is properly reduced by the full amount owed, while accurately reflecting the lower cash amount received in the bank column.

Bad debts recovered

Sometimes a business writes off a debt as uncollectable (bad debt), but later the debtor pays the money owed. This is called a bad debt recovered. While the initial write-off of a bad debt is recorded in the general journal, any bad debt recovered (when the money is actually received) is recorded in the cash receipts journal.

chatImportant

Bad debts recovered represent income for the business and increase both the bank balance and income. Recording it in the CRJ ensures that the cash received is properly accounted for and the bank balance is updated correctly.

Remember: Bad debt written off → General Journal (no cash involved) Bad debt recovered → Cash Receipts Journal (cash is received)

Worked example: Preparing a cash receipts journal

Let's work through a practical example to see how all these components come together. This example is based on Lonely Traders for June 2010, using a mark-up of 66⅔% on cost price.

lightbulbExample

Worked Example: Preparing a Cash Receipts Journal for Lonely Traders

Given Information:

Debtors at 31 May 2010:

J. Abrahams: R4 500
N. Rossouw: R3 800
M. Nelson: R2 600

Mark-up: 66⅔% on cost price

Selected June Transactions:

Transaction 1 (4 June): Owner R. Bosch increased capital from R185 400 to R210 000 by depositing money in the bank (Receipt 142)

Analysis:

Bank: R24 600
Sundry account: Capital (increase of R24 600)

Transaction 2 (4 June): Received R12 000 from M. Nkosi for monthly rent (Receipt 143)

Analysis:

Bank: R12 000
Sundry account: Rent income

Transaction 3 (4 June): Cash sales according to cash register: R15 400

Analysis:

Bank: R15 400
Sales: R15 400
Cost of sales calculation:
- Cost price = 100%, Selling price = 166⅔%
- Cost of sales = $\frac{100}{166\frac{2}{3}} \times \text{R}15\,400 = \text{R}9\,240$

Transaction 4 (12 June): Received cheque from M. Nelson for R2 550 in settlement of R2 600 account (Receipt 144)

Analysis:

Bank: R2 550
Debtors' control: R2 600
Discount allowed: R50 (R2 600 - R2 550)

Transaction 5 (15 June): Fixed deposit matured, received cheque for R32 500 (includes R2 500 interest for 6 months)

Analysis:

Bank: R32 500
Sundry accounts: Fixed deposit R30 000, Interest income R2 500

Transaction 6 (23 June): Cash sales: R5 600

Analysis:

Bank: R5 600
Sales: R5 600
Cost of sales: $\frac{100}{166\frac{2}{3}} \times \text{R}5\,600 = \text{R}3\,360$

Transaction 7 (23 June): Received cheque from J. Abrahams to settle 1 June account after 5% discount (Receipt 145)

Analysis:

Debtors' control: R4 500
Discount (5% of R4 500): R225
Bank: R4 500 - R225 = R4 275

Transaction 8 (27 June): Cash sales: R17 000

Analysis:

Bank: R17 000
Sales: R17 000
Cost of sales: $\frac{100}{166\frac{2}{3}} \times \text{R}17\,000 = \text{R}10\,200$

Transaction 9 (30 June): Bank statement shows credit entry of R210 for interest

Analysis:

Bank: R210
Sundry account: Interest income

Key Points for Recording:

Each transaction is recorded on a separate line in the CRJ. The bank column shows actual cash received, while the analysis columns break down what each receipt relates to. At the end of the month, all columns are totalled and posted to the respective ledger accounts.

infoNote

Exam Tip: When preparing a CRJ in an exam, work systematically through each transaction. First identify what was received (this goes in the bank column), then determine which accounts are affected. For cash sales, always remember to calculate and include the cost of sales using the given mark-up percentage. Show all your calculations clearly.

bookmarkSummary

Key Points to Remember:

The cash receipts journal records all money received by the business, including cash sales, debtor payments, and other income sources.
Each column in the CRJ serves a specific purpose: the bank column shows actual money received, while other columns classify the source and nature of the receipt.
Use the formula $\text{CP} + \text{P} = \text{SP}$ for all selling price and cost calculations, and remember the golden rule: what you're looking for goes on top of the fraction.
Discount allowed creates a relationship where $\text{Bank} + \text{Discount allowed} = \text{Debtors' control}$ . The discount is an expense for the business but encourages early payment.
Cost of sales is a non-cash entry in the CRJ that helps track inventory movement and update the trading stock account regularly.
Bad debts recovered are recorded in the CRJ (not the general journal) because money is actually received, increasing the bank balance and creating income for the business.

Cash Receipts Journal (Grade 10 NSC Matric Accounting): Revision Notes