A cash receipt is a printed acknowledgment of the amount of cash received during a transaction involving the transfer of cash or cash equivalent. The original copy of the cash receipt is given to the customer, while the other copy is kept by the seller for accounting purposes.
Without the business receipt and the information it contains, there is no official record of the shift in ownership following a purchase or a request for a refund or exchange. Nor is there clear-cut evidence of how much has been or still needs to be paid in the event that the fee is to be transferred over in installments. Receipts protect the buyer, the seller, and their business against uncalled-for recourse. They inject much-needed transparency into the transaction.
The printed cash receipt must have the following details in order to be considered a valid receipt:
The date of the transaction
The amount of the transaction
Description of the product or service
The total quantity sold.
The payor’s name or company name
Whether cash, cheque, or another payment method was used to complete the transaction
The payor’s signature
An identification numbers
Why Do You Need Cash Receipts?
When any of the following payment options are used, you must generate a cash receipt:
Using store credit for purchases
When you generate a cash receipt and receive one of the above-mentioned types of payment, you credit the sales on the profit and loss statement and debit the cash account in the cash receipts journal.
In accounting for cash receipts, the seller’s original cash receipt, whether it be printed or digital, is referred to as a source document. Source documents are proof that a business transaction was done and payment was received. It should be retained in order to support your financial accounts and for use in income tax reporting.
The easiest and safest place to save source documents today is online. If you use accounting or bookkeeping software, it is convenient to save one copy of the sale. As a backup, another copy should be uploaded to cloud storage.
Benefits of Tracking Cash Receipts
While creating and tracking cash receipts takes some effort, there’s a big payoff. Here are some of the most significant benefits of tracking cash receipts:
1. Proof of Sale: The first benefit of tracking cash receipts is having proof of a sale. If there’s a dispute with the customer or a refund, having a record of past cash purchases may be very helpful.
2. Accurate Accounting Records: Accurate accounting records help you make sound business decisions. They are also needed to generate an accurate tax return, which is required by law. Without cash receipts, you could under-report sales, which would lower your taxes and get you in trouble with the government, or you could under-report expenses, which would mean overpaying your taxes.
3. Evidence If Audited: If you wind up on the wrong side of an Internal Revenue Service (IRS) audit, you’ll be glad you have detailed records. You may need to provide your receipts as evidence that your taxes are correct in this situation.
What Happens If You Lose Track of Cash Receipts?
If you lose one or more cash sales receipts, having an accurate balance sheet may be difficult because the cash account will be incorrect. An inaccurate balance sheet can lead to an underestimation of business expenses and inflation of profit and revenue. This can be financially damaging to your business due to potential overspending and overestimating cash flow among other issues.
Reach Out for Help
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Cloud Bookkeeping, Inc.
3281 E. Guasti Road, Suite 700
Ontario California 9176
Tel: +1 (909) 952-3804