Lesson: 48

Topic: Cash Receipts Journal

Objectives:

The primary focus of this class is the Cash Receipts Journal which we can use to record cash receipts, along with their associated entries to the GST payable account.

In addition, we will note how Sales Discounts and Purchase Discounts are accounted for within the entries to these special journals.

Cash Receipts Journal
Date	Particulars	Other Accounts Credit			Accounts Receivable	Sales	Sales Tax Payable	Ref. No	Bank
		Account	P.R.	Amount	(CR.)	(CR.)	(CR.)		(DR.)
May 4, 2008	D. Smith	D. Smith, Capital	301	1,000.00					1,000.00
May 7, 2008	T. Whitley				648.00				648.00
May 8, 2008	Cash Sales					780.00	62.40		842.40
May 15, 2008	F. Kramer				324.00				324.00
May 18, 2008	Cash Sales					455.00	36.40		491.40
May 27, 2008	F. Kramer				756.00				756.00
May 31, 2008	Federal Government	GST Receivable	125	78.00					78.00
				1,078.00	1,728.00	1,235.00	98.80		4,139.80

The Cash Receipts Journal is used only to record cash sales or the payments received on our accounts receivable. Credit sales are recorded within the Sales Journal.

At the end of the month, we will subtract our total Input Tax Credits from the total GST which we charged (not collected from) our customers. Therefore, the balance of our GST Payable account will indicate the amount of GST which we must remit to the government.

Points to Remember: 1) GST is only recorded on cash sales. We will not record GST if a customer is remitting a payment on a previous credit purchase, because the GST was already accounted for within the Sales Journal back when we initially made the sale.

2) Calculate the "Sales Discount" on the TOTAL account receivable. As an example, if we sold an item for $93.46, plus GST of $6.54, we would charge a total of $100.00. A discount of 2/10, n/30 would mean that our customer could save $2.00 (2% of $100.00) if they were to pay the total bill within 10 days. 

Method of Instruction and Evaluation:

After a Socratic lecture on the above topics, students will complete the Cash Receipts Journal section of Exercise #4 on page 552 of the text (pages 423-429 in the workbook).

Expectations Addressed:

The "Advanced Accounting Practices" strand of the BAF3M Ministry of Education Curriculum Guidelines outlines all of the following specific expectations. The expectations addressed by this lesson have been highlighted below.

• The Accounting Cycle for a Merchandising Business:
  • describe the principal accounting elements particular to a merchandising business (e.g., new accounts, cost of goods sold section, returns, discounts);
  • identify and describe the periodic and perpetual inventory systems and journalize transactions using both systems;
  • assess the effects that transactions have on the accounts and financial statements of a merchandising business;
  • record transactions in the journals and ledgers of a merchandising business;
  • prepare a trial balance and the financial statements, including a detailed cost of goods sold section, for a merchandising business;
  • record the adjusting and closing entries for a merchandising business (e.g., accruals, inventory adjustment);
  • describe the impact of year-end procedures, including adjusting and closing entries, on the financial statements of a merchandising business;
  • describe alternative accounting practices (e.g., special journals and ledgers).
• Accounting for Sales Tax:
  • describe the accounting practices particular to sales tax (e.g., accounts required, financial statement presentation);
  • record transactions related to provincial sales tax (e.g., collections, remittance);
  • record transactions related to federal sales tax (e.g., collections, remittance).
• Computer Applications in Accounting:
  • use accounting or application software to record transactions for a service business;
  • use accounting or application software to record transactions for a merchandising business;
  • use accounting or application software to prepare financial statements.

Reference:

Please read this topic (page 545) in preparation for the class.

Handout: Understanding the Cash Receipts Journal