TOPIC

Cash Receipts Journal of a

9 services business (1)

In this topic, you will learn about FINANCIAL LITERACY.

We will look at:
• Cash Receipts Journal (CRJ) of a services business
• formats and uses of the columns in the CRJ
• source documents used to complete the CRJ
• entering of cash transactions in the CRJ
• balancing of the CRJ
• the effect of cash transactions on the accounting equation

Key concepts
• services business • Cash Journal • Cash Receipts Journal
• accounting equation

Figure 9.1 Leigh Anne runs Perfect Pooches and Rosie is her assistant.
They work on a cash-only basis and are paid on the day of the service.

Discuss in class
From everything you’ve learnt so far, how do you think Leigh
Anne keeps track of all the transactions? What source documents
does she use when they buy shampoo and ribbons? What
source documents does she use when they receive cash from
their clients? Where would Leigh Anne record all these source
documents?

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 What is a services business?
We’ve already learnt that a services business is a business that
sells a service or skill to its clients. Can you think of some
examples? How about a hairdresser, or a mechanic, or a dog
washer? Large services businesses include banks, hospitals, the
post office etc.
In Grade 8, we are going to deal with the Cash Journals of
services businesses only.

What are Cash Journals?

We have learnt that, in a service business, two types of cash
transactions take place on a continuous basis: cash receipts and
cash payments. That is why two types of subsidiary journals are
used to summarise these transactions: the Cash Payments Journal
(CPJ) and the Cash Receipts Journal (CRJ).
The CPJ shows all transactions during which someone is paid
by cheque are recorded in this journal. We will deal with CPJs in
Topic 14.

Cash Receipts Journal

In Topic 8, we found out about the purpose of a CRJ and what
it is used for. All the cash received by the business is recorded
Glossary
in the Cash Receipts Journal. The information is taken off the
following source documents: Cash Receipts
Journals: record of
• receipts issued to clients
all cash received by
• deposit slips a business
• cash register roll.

The formats and uses of columns in the CRJ

Example
   
Cash Receipts Journal of Perfect Pooches for December 2015 CRJ12
Doc. Day Details Fol. Analysis of Bank Current Sundry accounts 
no. receipts Income Amount Fol. Details
         

  
  
 The name of the subsidiary journal
 The name of the business
 The month and year relating to the transactions

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  The journal reference number; in this case CRJ (for Cash Receipts Journal) and 12
(for the 12th month)
 The number of the source document used
 The date when the cash was received
 Who paid the cash to the business
 The folio number of the debtor involved (only used in Grade 9)
 The cash received for each individual transaction
 The amount of money paid into the bank account at the end of each day (total of all
receipts above it)
 Cash received for services rendered; only the total banked each day
 For accounts other than those specifically listed in columns in the CRJ
 The sundry amount received
 The folio number of the account involved in the General Ledger, which is entered
after posting as a cross-reference
 The relevant General Ledger account e.g. Rent income, capital etc.
 The total of all the amounts in each column and the amounts in the sundry accounts,
which will be posted to the General Ledger
 The folio number of the account involved in the General Ledger

Source documents used to complete the CRJ

The following source documents are used in the CRJ:
• Receipt: Issued when the business received money, either
from the owner for Rent or Capital, or from customers for
services rendered. The business keeps the copy (duplicate)
and give the original to the payee.
• Cash register roll: If receipt books are not used, then a cash
register issues receipts on all payments for services rendered.
The client received the original slip and the copy (the roll)
stays in the machine to indicate the total sales at the end of
the day.
• Cash invoice issued: Issued when the business doesn’t have
a cash register but only an invoice book. The business keeps
the duplicate and gives the original to the client. Sometimes
a receipt is attached to the invoice as proof of payment.
• Deposit slip: Usually completed at the end of the day to
deposit the total receipts for that day. The bank keeps the
original and the business keeps a duplicate.

The bookkeeper uses all these source documents to update the

Cash Journals.

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 Entering cash transactions in the CRJ

Example
On their first day of trading, Perfect Pooches issued the following
receipts:

Source Doc. Date Amount Issued to: For:

R 001 01 Dec R1 000 Leigh Anne Marais Start-up capital paid directly
into bank account
C 01 05 Dec R50 Mrs Smit Wash dog
C 02 11 Dec R100 Mr Patel Wash 2 dogs
C 03 21 Dec R120 Ms Tongwana Wash & trim dog
R 002 28 Dec R500 Leigh Anne Marais Extra capital received from
her grandma
C 04 28 Dec R240 Mrs Lewis Wash & trim 2 dogs
How do we record these transactions?

Solution

R 001 01 Dec R1 000 Leigh Anne Marais Start-up capital paid directly
into bank account
This deposit is paid directly by the owner into the account and is
therefore not recorded under Analysis of receipts.

Cash Receipts Journal of Perfect Pooches for December 2015 CRJ1

Doc. Day Details Fol. Analysis of Bank Current Sundry accounts (12)
no. receipts Income Amount Fol. Details
R001 01 L Marais 1 000 00 1 000 00 Capital
The rest of the deposits will be recorded under Analysis of
receipts and banked every day.

Cash Receipts Journal of Perfect Pooches for December 2015 CRJ1

Doc. Day Details Fol. Analysis of Bank Current Sundry accounts (12)
no. receipts Income Amount Fol. Details
R001 01 L Marais 1 000 00 1 000 00 Capital
C 01 05 Services rendered 50 00 50 00 50 00
C02 11 Services rendered 100 00 100 00 100 00
C03 21 Services rendered 120 00 120 00 120 00
R002 28 L Marais 500 00 500 00 500 00 Capital
C04 Services rendered 240 00 240 740 00
00 240 00

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 Balancing the CRJ
Once we have completed the CRJ for the month, we need to
find the totals of each column. The totals of the Bank column
must equal the sum of all the other columns. If these two totals
are the same, we say the CRJ balances – the same amount
appears on both ‘sides’ of the CRJ.

Example
Let’s balance Perfect Pooches’ CRJ for December.
We don’t total the Analysis of receipts column. It’s only a
breakdown of the Bank column.

Cash Receipts Journal of Perfect Pooches for December 2015 CRJ1

Doc. Day Details Fol. Analysis of Bank Current Sundry accounts (12)
no. receipts Income Amount Fol. Details
R001 01 L Marais 1 000 00 1 000 00 Capital
C 01 05 Services rendered 50 00 50 00 50 00
C02 11 Services rendered 100 00 100 00 100 00
C03 21 Services rendered 120 00 120 00 120 00
R002 28 L Marais 500 00 500 00 500 00 Capital
C04 Services rendered 240 00 740 00 240 00
2 010 00 510 00 1 500 00

Let’s see if the CRJ balances:

Total Bank column R2 010
Total other columns: Current income R 510
Sundry accounts R1 500 R2 010
––––––––––
The totals are the same, so we say the CRJ balances.

The effect of cash transactions on the

accounting equation
In Topic 5 we saw how to enter a transaction on the accounting
equation. Let’s take the transactions above and see how it affects
the accounting equation.
There are two main transactions: capital received and current
income received.

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 Example
Capital received from owner Leigh Anne, R1 000.

Assets Owner’s Equity Liabilities

Effect Reason Effect Reason Effect Reason
+1 000 Cash increased +1 000 Owner’s capital
contribution

Total receipts for services rendered deposited into bank account,

R510

Assets Owner’s Equity Liabilities

Effect Reason Effect Reason Effect Reason
+510 Cash increased +510 Services rendered
— income

In Topic 13, we will do more activities involving Cash Receipts

Journals.

Activity 9.1
Mr F Sidlani always used to repair his friends’ broken
lawnmowers as a favour. On 1 June 2013, he decided to open
his own business, Sidlani Repair Services. Since Mr Sidlani
has a number of tools, he does not need to buy any new tools
immediately. He does not have a cash register and uses a cash
invoice and receipt book.
Required
1. Complete the Cash Receipts Journal for June 2013. Make
provision for the following columns: Analysis of receipts,
Bank, Current Income and Sundry Accounts. (25)
2. Complete the deposit slip for a deposit made on 1 June
2013 as follows:
• 21 × R100 notes
• 13 × R50 notes
• 7 × R20 notes
• 22 × R5 coins
Account number 456 333 605 was awarded by SABA Bank,
Porterville branch.  (9)
3. Complete the cash invoice for his first client based on the
transactions below. (6)
4. Complete the receipt for the money received from
F Komano. (8)
5. Show the effect on the accounting equation of the
transactions completed on the 1st and the 21st.  (6)

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 Example: Paid stationery, R220
Assets Owner’s Equity Liabilities
Effect Reason Effect Reason Effect Reason
–220 Cash decreases –220 Stationery —
expense

6. Analyse the transactions of the 1st and the 21st using the
table below. (12)

Example: Paid stationery, R220

No. Other account Type of A/OE Source document
involved account + or – used
except BANK
e.g. Stationery Expense OE– Cheque counterfoil

Transactions for June 2013

01 Mr F Sidlani used some of his savings to open a bank
account for his new business, Sidlani Repair Services. He
completed a deposit slip for R3 000 at the bank and issued
receipt no. R01
03 Received R104,45 cash from F Shezi for repairs to a
lawnmower. Issued cash invoice no. C01
15 Deposited cash receipts for repairs to several lawnmowers,
R1 334,60
ects 21 Repairs to lawnmower, R570,40
Received R250 from F Komano, who rents some storage
space from him
25 Cash received for services rendered, R965,60
oyers
30 The owner increased his capital by R1 200.
Received R227,40 for repairs to lawnmowers
ses
Activity 9.2
or Jessica Malambe is the owner of Jessi’ Hairdo. Jessi’ Hairdo uses
a cash register. Cash and cheques are deposited daily.
Required
1. Prepare the Cash Receipts Journal (CRJ5) for May 2012.
Make provision for the following columns: Analysis of
receipts, Bank, Current income and Sundry accounts. (19)
2. Complete the deposit slip that Jessica completed on 1 May
2012 as follows:
• R5 200 in notes
• R355 in silver coins

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 • R10 in bronze coins
• BNF BANK cheque (Paarl) from J Lintvelt for R270
Jessica uses the bank services of DENBANK (Paarl) with
account number 113 354 202.  (12)
3. Complete the receipt for the money received from R Lazy. (7)
4. Show the effect on the accounting equation of the
transactions completed on the 1st and the 10th.  (8)

Example: Paid stationery, R220

Assets Owner’s Equity Liabilities
Effect Reason Effect Reason Effect Reason
–220 Cash decreased –220 Stationery —
expense

Transactions for May 2012

01 Owner increased her capital contribution by R3 500. Issued
receipt no. 23
Total cash receipts for the day, R2 335
06 A customer, P Harris, paid R300 for a cut and colour.
10 Total cash receipts for the day according to the cash register,
R4 015
Received cheque from tenant R Lazy for R500
24 Received R200 from B Pitt as a payment for a wash, cut and
blow dry

Activity 9.3
Creative Caterpillar provides a design and printing service for
business letterheads, business cards and other business stationery
requirements.
Required
1. Use the transactions to set up the CRJ of Creative
Caterpillar for May 2015. Supply analysis columns in the
CRJ for: Analysis of receipts, Bank, Current income, Sundry
accounts.(13)
2. Complete the receipt issued on 28 May 2015. L Kahn is the
receptionist working for the business. (7)

Transactions for May 2015

01 D Gouws increased his capital contribution by R52 000,
which he paid directly into the business’s current bank
account. Receipt no. 011 issued

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 16 Cash receipts according to the cash register roll for services
rendered, R1 133
28 Received R189 from Les Hauts for rent of storeroom. Issued
receipt
Services rendered according to the cash register roll, R850

Activity 9.4
Required
Record the following transactions in the Cash Receipts Journal
of Zinzi’s Salon for April 2016. Provide columns for: Analysis of
receipts, Bank, Current Income and Sundry accounts. (14)
Transactions for April 2016
01 Z Magqazana started a business with a capital contribution
of R65 000 deposited directly into the current bank account
of Zinzi’s Salon. Issued receipt no. 01
14 Cash received for services rendered for the day, R1 330
30 Cash register roll shows services rendered for the day
amounted to R2 464
Z Magqazana decided to increase her capital contribution
to R70 000. She issued the business with a personal cheque
and received a receipt in return

Summary
• A services business sells a service or skill to a customer.
• Cash journals record the daily cash transactions of a
business.
• A Cash Receipts Journal (CRJ) records all the cash and
cheques received by a business.
• There is a specific format for a CRJ of a services business
but it must always contain: Analysis of receipts, Bank,
Current income and Sundry accounts columns.
• Every cash receipt is recorded in the CRJ, using deposit
slips, receipts, cash register rolls and cash invoice books as
the source journals.
• When the total of the Bank column is the same as the
totals of all the other columns to the right of it, we say
the CRJ balances.
• A CRJ is balanced at the end of every month.
• CRJ entries increase the assets because they increase the
money (bank) of the business.

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