Cash Receipt

A cash receipt is the collection of money by a business. The money may arrive as currency and coins, a check, a card payment, an ACH transfer, a wire or a mobile payment; in accounting, all of these count as cash once they are received. The phrase also refers to the document that records the collection, such as a printed or emailed receipt given to the customer, a cash register tape or a remittance advice.

Cash receipts are one of the most frequent transactions in any business and one of the most exposed to error and theft. They are recorded in the cash receipts journal or the cash receipts module of accounting software, debited to the Cash account, and credited to whatever the money is for: a sale, a customer's account, a loan, an owner's investment or a refund.

Whenever money comes into a business, that is a cash receipt, whether a customer hands over notes at the counter, mails in a check, taps a card or sends a bank transfer. The business makes a record of each one, and usually gives the payer a slip of paper or an email confirming it.

Recording every receipt carefully, and making sure the money really reaches the bank, is one of the most basic jobs in bookkeeping, because money that is not recorded is easy to lose or steal.

• Cash sales. Debit Cash; credit Sales Revenue, and Sales Tax Payable where applicable.
• Collections from customers on account. Debit Cash; credit Accounts Receivable. If the customer takes an early-payment discount, debit Sales Discounts for the discount taken.
• Borrowing. Debit Cash; credit Notes Payable, as with loan proceeds.
• Owner investment or stock issued. Debit Cash; credit owner's capital or common stock.
• Other receipts, such as interest, dividends, rent, refunds from suppliers and proceeds from selling equipment.

For example, a customer owing $5,000 on terms of 2/10, net 30 pays within the discount period. The business receives $4,900 and records a debit to Cash of $4,900, a debit to Sales Discounts of $100 and a credit to Accounts Receivable of $5,000.

For customer payments, the receipt must be matched to the right invoices, a step called cash application. Larger businesses often use a bank lockbox system, in which customers send checks directly to a post office box managed by the bank, which deposits them and sends the business an electronic file of payments. Electronic receipts arrive with remittance information that software can match automatically. Unmatched payments are held in a suspense or unapplied cash account until they are identified.

Cash receipts controls aim to make sure that every dollar received is recorded and deposited. Common controls include:

• Separating the duties of receiving cash, recording receipts and reconciling the bank account, consistent with segregation of duties.
• Opening mail in the presence of two employees and listing checks immediately.
• Restrictively endorsing checks "for deposit only" as soon as they are received.
• Depositing all receipts intact and promptly, usually daily, using a deposit slip that can be compared with the receipts list.
• Using pre-numbered receipts and cash registers or point of sale systems that record every transaction, and investigating any differences between counted cash and recorded sales.

Weak controls allow schemes such as lapping, in which an employee steals one customer's payment and covers it with a later customer's payment. Regular bank reconciliations and statements sent to customers help detect such schemes.

On the statement of cash flows, cash receipts are classified by their source. Collections from customers and interest and dividends received are operating activities under US GAAP; proceeds from selling equipment or investments are investing activities; and proceeds from borrowing or issuing stock are financing activities. Under the direct method, the operating section lists cash receipts from customers as its first line.