Overview:

Cash payments journal is the special journal that uses to records all the payments that entity made by cash.

This special journal is created when the entity makes the accounting records by using an accounting manual and there are a lot of cash payments transactions that occur.

Especially when there are large cash payments transactions occur in the business every day.

Records these transactions separately from the general journal help the entity to reduce the large amounts of transactions from the general journal.

Explanation and Example:

If an entity using an accounting system to records is accounting information, all of the financial transactions are records in the system by making the journal entries and all of the entries will directly affect the financial statements and other books like general ledgers and trial balance.

Cash payments journal records only cash outflow payments while cash collection is recording in the cash receipt journal.

The common cash payments transactions that record in this journal are paying to creditors, payments to suppliers, payments to the employee as well as a fund that return to customers.

If the entity makes credit purchases, then all the purchases are recordings in the purchase journal.

The cash payments journal is not much different from another special journal. Its main objective is to make collect all the similar types of transactions together.

And the key information that includes in this journal is the entity name and accounting period that these cash transactions have occurred.

Accounting number and accounting reference is also the importance and should be included. Debit and credit for both cash accounts and its correspondence accounts should also include.

Related article  Recurring Journal Entries

The key information that should contain in this journal is the name of accounts, Accounting Reference, debit amount and credit amount.

Credit amount is obviously cash while the debit amount is normally expenses or assets that the payments are made to.

For example, if the payments are made for wages expenses, then the debit account should be the wage account.

Cash payment journal:

For example, the company makes payments to workers on the workers’ wages amounts to USD500,000 in cash.

In this case, the cash payment journal would be,

Debit workers’ wages amount USD 500,000

Debit Cash on hand amount USD 500,000

(Memo: workers’ wages for July 2017)

Another example related to the cash payment journal: Company makes payment to the supplier for the company’s car that purchased last week amount of USD 50,000 by cash.

In this case, we expected that the company already record the account payable to the supplier for purchasing company car amount USD 50,000.

In this case, we record as following:

Debit account payable ( supplier name maybe) amount USD 50,000

Credit cash amount USD 50,000

(Memo: Payment for a company car)

However, if the company fail to recognize account payable for USD50,000, the recording should be as follow:

Debit fixed assets ( car is the fixed assets) USD 50,000

Credit cash USD 50,000

(Memo: Payment for the company’s car)

Sinra