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Cash is commonly received by the business under the following situations:
1. Receipt of payment by a debtor in cash.
2. Sale of goods by the business on a cash basis.
3. Withdrawal of cash from the bank.
4. Cash received from other income.
5. Additional capital introduced by the partner, etc.
It is important to note that the receipt of cash in any of the above-mentioned scenarios is always debited in the books of accounts because it is an asset for the business.
The journal entries for receipt of cash in different scenarios as discussed above are as follows;
1. Journal entry for cash received from the debtor
When an organisation sells goods or services on credit, it becomes eligible to receive future payments. As an obligation, the debtor pays cash to the organisation. The journal entry for cash received from the debtor is as follows;
| Cash A/c | Debit | Real | Debit what comes in |
| To Debtor A/c | Credit | Personal | Credit the giver |
(Being cash received from the debtor)
As per the modern rules of accounting;
| Cash A/c | Debit the increase in asset |
| Debtor A/c | Credit the decrease in asset |
2. Journal entry for cash received from the sale of goods
When an entity sells goods or services on a cash basis, it receives cash at the time of sale only. The journal entry for cash received from the sale of goods is as follows;
| Cash A/c | Debit | Real | Debit what comes in |
| To Sales A/c | Credit | Nominal | Credit incomes & gains |
(Being goods sold in cash)
As per modern rules of accounting;
| Cash A/c | Debit the increase in asset |
| Sales A/c | Credit the increase in revenue |
3. Journal entry for cash received from withdrawal
When cash is withdrawn from the bank, it results in an increase in cash a/c and a decrease in bank a/c. The journal entry for cash received from withdrawal is as follows;
| Cash A/c | Debit | Real | Debit what comes in |
| To Bank A/c | Credit | Personal | Credit the giver |
(Being cash received from withdrawal)
As per modern rules of accounting;
| Cash A/c | Debit the increase in asset |
| Bank A/c | Credit the decrease in asset |
4. Journal entry for cash received from other income
Other than sales, there are other sources of income through which cash can be received such as rent received, interest income, the commission received, etc. The journal entry for cash received from other income is as follows;
| Cash A/c | Debit | Real | Debit what comes in |
| To Other Income A/c | Credit | Nominal | Credit incomes & gains |
(being cash received from other incomes such as commission, rent, interests, etc)
As per modern rules of accounting;
| Cash A/c | Debit the increase in asset |
| Other Income A/c | Credit the increase in revenue |
5. Journal entry for additional capital introduced by the partner
Capital is introduced by the partners or proprietors of a business, resulting in an increase in cash flow. The journal entry for additional capital introduced by the partner is as follows;
| Cash A/c | Debit | Real | Debit what comes in |
| To Capital A/c | Credit | Personal | Credit the giver |
(Being additional capital introduced)
As per modern rules of accounting;
| Cash A/c | Debit the increase in asset |
| Capital A/c | Credit the increase in revenue |
Conclusion
As a result of cash receipts by an organization, the amount of cash inflow increases, which has an impact on the cash flow statement. However, whenever cash is received, it results in a double entry on either the asset or liability side of the balance sheet.
As an example, when cash is received from the debtor, the cash will increase, while at the same time, the number of debtors will decrease.
In the case of the introduction of capital, cash will be increased but with that, the liability will also be increased.
