Accounting - Term 1 - Week 6

Imagine Thandi runs a tuckshop in Soweto, selling vetkoek and cooldrinks to learners. Every time she receives cash from a sale or pays for bread, she needs a way to track the money. That’s where the Cash Receipts Journal (CRJ) and Cash Payments Journal (CPJ) come in. These journals record all cash coming in (receipts) and going out (payments) daily. For example, when Thandi sells R50 worth of snacks, she records it in the CRJ. When she pays R30 for bread, it goes in the CPJ. Without these records, she could easily lose track and run out of cash. The rule: Only record transactions where cash actually moves. Credit sales or purchases go elsewhere. Many learners mistakenly record credit sales in the CRJ—remember, only cash counts here.

Sipho, who helps his uncle’s spaza shop in Khayelitsha, knows that every cash transaction needs proof. These proofs are called source documents. For cash received, common documents include cash register slips and duplicate receipts. For cash paid out, you’ll see cheque counterfoils, cash payment vouchers, or even EFT proof slips. For example, if Sipho receives R200 from a customer, he issues a receipt—this is the source document for the CRJ. If he pays R100 to a supplier via EFT, the bank slip is the source document for the CPJ. Source documents are vital for audits and to prevent fraud. Don’t confuse source documents with invoices: invoices are for credit sales or purchases, not cash.

Lerato’s hair salon in Polokwane gets dozens of customers daily. Each cash receipt—whether for a haircut or braids—gets entered in the CRJ, using the date, details, source document number, and amount. Payments, like buying hair products, are entered in the CPJ. The process: (1) Identify the transaction and check if it’s cash, (2) Find the correct source document, (3) Enter the details in the right journal. For example, on 5 March, Lerato receives R150 for a haircut (receipt 012). She enters: Date: 5 March, Details: Haircut, Doc No: 012, Amount: R150 in the CRJ. If she pays R80 for shampoo (EFT slip 005), it goes in the CPJ. The key is accuracy—one wrong entry can throw off the whole month’s records.

At the end of the week, Ahmed in Durban totals his CRJ and CPJ to see his cash position. If his CRJ totals R2,000 and his CPJ totals R1,500, he knows he’s made a net cash gain of R500. This helps him decide if he can buy more stock or needs to cut expenses. Balancing means adding up all receipts and payments, then checking if the cash on hand matches the records. If not, there’s likely a mistake—maybe a transaction was missed or entered twice. This is a common error: forgetting to include petty cash payments or bank charges. Always double-check entries and totals before making business decisions.

Step 1: Read the transaction. On 3 March, Banyana Banyana Academy receives R1,200 cash from a sponsor for new soccer kits. Step 2: Identify the source document. The academy issues receipt 045 to the sponsor as proof of payment. Step 3: Enter in the CRJ. Date: 3 March, Details: Sponsor, Doc No: 045, Amount: R1,200. Step 4: Check that this is a cash transaction (not credit) by confirming the money was received immediately. Step 5: Add the amount to the CRJ total for the month. Final answer: The R1,200 is correctly recorded in the CRJ, increasing the business’s cash on hand. Sanity check: The cash on hand should increase by R1,200, matching the receipt and the bank deposit slip.

Step 1: Read the transaction. On 7 March, Ahmed pays R500 cash for electricity to keep his Durban shop running during load-shedding. Step 2: Identify the source document. He uses EFT slip 022 as proof of payment. Step 3: Enter in the CPJ. Date: 7 March, Details: Electricity, Doc No: 022, Amount: R500. Step 4: Confirm this is a cash payment, not a credit purchase, by checking if the money left the account immediately. Step 5: Add the amount to the CPJ total for the month. Final answer: The R500 is correctly recorded in the CPJ, reducing the business’s cash on hand. Sanity check: The bank statement should show a R500 deduction on 7 March, matching the EFT slip.

Step 1: Add up all amounts in the CRJ for March. Suppose total receipts are R3,600, including sales, sponsorships, and other income. Step 2: Add up all amounts in the CPJ for March. Suppose total payments are R2,800, including rent, electricity, and stock purchases. Step 3: Calculate net cash movement: R3,600 (receipts) minus R2,800 (payments) = R800. Step 4: Compare this net increase to the actual cash on hand at month-end. If the cash on hand is R800 more than at the start of March, the records are accurate. Final answer: The journals balance, showing a net cash increase of R800. Sanity check: If there’s a difference, check for missing, duplicated, or incorrectly recorded entries, and verify with bank statements.

Question: Sipho sells goods worth R350 to a customer who pays immediately. Is this a cash or credit transaction? Model: Let’s check—did cash move? Yes, the customer paid now, so it’s a cash transaction. Worked response: This is a cash transaction and belongs in the CRJ because the money was received right away. Similar question: Lerato buys hair dye from a supplier but will pay next month. Where does this go? Answer: It’s a credit purchase, so it is not recorded in the CPJ but in the Creditors Journal, because no cash moved yet.

Question: On 10 March, Thandi pays R200 for minibus taxi advertising, using cheque 018. How do we record this? Model: Check if it’s a cash payment (yes), find the source document (cheque 018), and enter it in the CPJ. Worked response: Date: 10 March, Details: Taxi advertising, Doc No: 018, Amount: R200 in the CPJ. This reduces cash on hand. Similar question: On 12 March, Ahmed receives R400 for catering services, issues receipt 030. Where and how is this recorded? Answer: In the CRJ, Date: 12 March, Details: Catering, Doc No: 030, Amount: R400, increasing cash on hand.

Question: At month-end, CRJ total is R2,500, CPJ total is R2,100. What does this mean? Model: Subtract CPJ from CRJ: R2,500 - R2,100 = R400. Worked response: The business has a net cash increase of R400 for the month, meaning more cash was received than paid out. Similar question: If the CPJ total is higher than the CRJ, what does that mean? Answer: The business spent more cash than it received, so there is a net cash decrease for the month.

1. List two common source documents for cash receipts, such as a receipt or a cash register slip. 2. State whether each is cash or credit: (a) Paying for groceries by EFT, (b) Selling goods to a customer who pays next month, (c) Receiving cash for services. Give a reason for each answer. 3. Name the journal for recording cash received and explain why it is used for this purpose.

1. Record the following in the correct journal: On 15 March, Sipho receives R800 for repairs (receipt 021). On 16 March, he pays R250 for petrol (EFT slip 009). Include all details for each entry. 2. Ahmed buys stock for R1,000 on credit. Which journal is used, and why is it not the CPJ? 3. Calculate the net cash movement if CRJ = R3,000 and CPJ = R2,700. Show your working.

1. A business’s CRJ total is R4,500, CPJ total is R5,200. Analyse the cash position and suggest one action the owner could take to improve it. 2. Justify why invoices are not used for cash transactions, using an example. 3. Interpret what it means if the cash on hand does not match the journals at month-end, and suggest two possible reasons for the difference.

• Invoice
• Receipt
• Order form
• Credit note

Answer: Receipt

A receipt is proof of cash received. An invoice is for credit sales, not cash.

• CRJ
• CPJ
• Debtors Journal
• Creditors Journal

Answer: CPJ

Cash payments are entered in the CPJ, which stands for Cash Payments Journal. The CRJ is only for money received, not for payments. Many learners confuse the two, but always remember: payments out go in the CPJ.

• Cheque counterfoil
• EFT slip
• Receipt
• Cash payment voucher

Answer: Receipt

Receipts are for cash received, not payments. EFT slips, vouchers, and cheque counterfoils are for payments.

• CRJ
• CPJ
• Debtors Journal
• Petty Cash Journal

Answer: Debtors Journal

Credit sales go in the Debtors Journal, not the CRJ or CPJ. Many learners incorrectly record credit sales in the CRJ, but only cash received belongs there. The Debtors Journal is specifically for credit sales.

• Net cash increase
• Net cash decrease
• No change
• Error in journals

Answer: Net cash decrease

More cash paid out than received means a decrease. Many confuse this with an increase.

Answer: Receipt, cash register slip

Both a receipt and a cash register slip are used as proof of cash received. These documents are essential for recording entries in the CRJ and for audit purposes. Cheque counterfoils and EFT slips are for payments, not receipts.