Definition of Cash Receipts
In simple terms, a cash receipt is the official document of receipt of cash from the external sources like receipts from debtors, receipt from a bank, and receipt as loan from third party etc. and in order to formalize the transaction, cash receipts are generated and can be presented as the proof of amount receivable.
A business organization has to perform many functions like management of inventory, investors, debtors etc., for all the management, cash is primarily used in business. Hence it is necessary to make the record of cash so as to verify and present the true picture of the business. The cash transactions in the business occur in the form of receipts and payment. Example of cash receipts are receipts from debtors, bank etc. Against every cash receipt, the business organization generates a formal document called ‘cash receipt’ to record the transaction. As cash is an important item for every business, the chances of teaming & leading and other frauds become the more. Hence maintenance of records in the form of cash receipt is very important and necessary. The pro forma for cash receipts vary from organization to organization. Some prefer detailed records, while others prefer the summary receipts.
Characteristics of Cash Receipt
Following are the characteristic of Cash Receipt:
- Presented as Proof: Cash receipt is the proof of cash received, whether it is from cash sales, receipts from debtors, loan receipts etc.
- Legally Enforceable document: Cash receipt is the formal document; hence it can be presented as proof when the law demands. Hence it is a legally enforceable document.
- Issued for Maintenance of records: Cash Receipts are generated to maintain the cash records to prevent deflection and other cash-related misappropriations.
- Helps in detection of any misappropriation: If an issue of cash receipt is the trend of the organization, then any misappropriation of cash can be easily traced with the records.
How to Write Cash Receipt?
Following content to be written in cash receipts:
- The date of the receipt and the name of the receiver’s organization of cash should be there in the cash receipt.
- The unique serial number pre-printed to be contained by cash receipt voucher.
- Name of payer and name of business organization of payer must be written in the cash receipt.
- The purpose of receiving the cash, i.e. whether cash is received against a loan or against sales, etc., with details to be written to keep track of various records.
- Cash receipt also contains the signature of the receiver so as to know that the authorized person is receiving the cash.
- Mode of payment, whether the cash, cheque or online transfers to be written on cash receipt voucher.
Example of Cash Receipt
ABC & Co. sold goods to Mr. Z amounting to $ 500 on 01.04.2020. Mr. Z didn’t pay the bill immediately and promised to pay the bill after one month. ABC & Co. recorded the sales as sales are made to Mr. Z and Mr. Z as a debtor. After one month, the collection agent of ABC & Co. went to the premises of Mr. Z to collect the debt against the bill in cash. The agent presented the bill to the authorized person of Mr. Z’s organization, and after verifying the bill Mr. Z’s authorized person cleared the payment and issued the cash payment receipt and signed it and get signed it by the agent of ABC & Co. also. The agent of ABC & Co. also issued the cash receipt voucher as proof of clearance of debt as below:
Cash Receipt Format
Cash receipts format are given below:
Advantages of Cash Receipts
Following are the advantages of cash receipt:
- A cash Receipt voucher is a legally enforceable document.
- It helps in keeping records of cash received and cash paid.
- With the issuance of cash receipt and payment voucher and deflection can be traced.
- Cash receipt voucher contains the details of the payer so that in case of any discrepancies payer can be easily traced.
- The issuance of a cash receipt voucher enforces the issuer to maintain the records correctly, and it reduces the chances of misappropriation.
- Cash receipt is one of the primary documents maintained by every organization.
- The contents of the cash receipt are clear and unambiguous, which helps to track the records and find out the remaining balance receivable or payable by the organization.
- The records can be proved as verification of cash at any point in time.
Disadvantages of Cash Receipts
Following are the disadvantages of cash receipt:
- The cash receipt does not show the non-cash transactions like depreciation, interest accrued, etc.
- It does not reflect the mutual settlements of debtors and creditors hence sometimes become unable to trace.
- The cash receipt does not contain the name of the authorized person, so there are chances of manipulating the receiver and misappropriation of cash.
- It does not contain the records of discount given or received.
- It does not differentiate between revenue and capital receipts.
Cash receipt is the type of document which is issued on receipt of the cash by the receiver organization. Cash receipt voucher contains the serially number pre-printed so as to prevent from the misappropriation of cash. The cash receipt voucher contains the details of the payer. The voucher can be presented as legal proof and accepted at a court of law as proof, but the cash receipt voucher does not show the difference between revenue and capital expenditure. It also does not contain the records of non-cash transactions. With the records of cash vouchers, whether receipts or payments, the position of cash can be traced easily. There is a specific format of cash receipts that differs from organization to organization. The more clear and unambiguous the format, the more it becomes easy to track and trace.
This is a guide to Cash Receipts. Here we also discuss the definition and how to write a cash receipt? Along with advantages and disadvantages. You may also have a look at the following articles to learn more –