Cash Payments Journal

Posted by Professor Cram in Special Journals

Special Journals

In a typical 2-column manual accounting system, transactions are entered as debits to one (or more) account and balancing credits to one (or more) account. If you consider some recurring transactions (such as sales) that will hopefully occur many times during an accounting cycle, all this double entry can add up to a lot of work. That's where special journals come into play.

Special journals are designed as a simple way to record a single type of frequently occurring transaction. The types of special journals depends on the nature of the business, but a few types are frequently seen in businesses that rely on manual accounting procedures:

Cash Payments Journal

The Cash Payments Journal is used to record all cash payments made by a company. (Credit purchases are not recorded here, they belong in the purchases journal.)

All transactions in the cash payments journal involve the disbursement of cash, so you'll find a column for crediting cash (Cash CR.). There is also a credit column for purchases discounts in case the transaction involves a discounted purchase.

To balance these credits, you'll find two debit columns. Accounts Payable is the account most likely to be involved in these transactions (besides cash). The column for Other Accounts is for all other types of cash-payment transactions that don't involve accounts payable.

See the columns available in the Cash Payments Journal in Figure A below. (To see Figure A, click the A button in the flash program at the bottom of this page. This is where you'll find all the figures for this tutorial.)

Cash Payments Journal Examples

Consider the following transactions for your cash payments journal:

  • Paid $455 for office equipment;
  • Paid $1,200 for purchases;
  • Paid $2,000 to Supplier A against accounts payable, taking a purchases discount of $225;
  • Paid $1,125 for purchases;
  • Paid $765.50 to Supplier B against accounts payable.

These transactions are posted in the cash payments journal as shown in Figure A below.

Posting from the Cash Payments Journal

The column values are posted in their own separate ways:

  • Transactions from the Other Accounts column should be posted individually in the general ledger, as shown in Figure B and Figure C below. (The account number for the general ledger account is placed in the posting column of the Cash Payments Journal.)
  • NOTE: You could combine the two Purchases entries in Figure C below into a single general ledger posting, but keeping them as separate entries will make it easier later on in case you have to hunt down any difficulties (such as balancing an unbalanced trial balance).
  • When you record cash payments against accounts payable, you should post individual transactions as debits to the supplier accounts in the accounts payable ledger. The accounts payable total at month's end is then posted in the general ledger, as shown in Figure D below.
  • Purchases discounts should be posted as a single Purchases Discounts credit total in your general ledger, as shown in Figure E below. (These should also be posted as credits to the corresponding supplier account in the accounts payable ledger).
  • Cash should be posted as a single credit total in your general ledger, as shown in Figure E below.

Cash Payments Journal Illustrations

The Cash Payments Journal is a special journal designed to record a single type of frequently occurring transaction — in this case, cash payments. This tutorial cover the concept of the cash payments journal from the original transactions through the posting process.

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