Question

What does a cash receipts journal and a cash payments journal record? How do cash journals aid the posting of the ledger?

A) Cash receipts journal records money received, while cash payments journal records expenses paid. They aid in tracking bank statements.
B) Cash receipts journal records expenses paid, while cash payments journal records money received. They aid in tracking cash flow.
C) Cash receipts journal records money received, while cash payments journal records expenses paid. They aid in organizing financial reports.
D) Cash receipts journal and cash payments journal are used interchangeably for recording all financial transactions.

Answer 1

A cash receipts journal records cash received and a cash payments journal records expenses paid. They help in posting to the ledger by providing summarized records that make tracking and analyzing cash flow organized and efficient.

Step-by-step explanation:

The cash receipts journal records all cash inflows, meaning money that the company receives. This could be from sales, loans, interest, and other sources. On the other hand, the cash payments journal records all cash outflows, which are the expenses or payments made by the company. This can include payments for goods, services, salaries, and more.

Cash journals simplify the process of posting to the ledger by providing a summarized record of all cash transactions. When journal entries from cash receipts or cash payments are made, the totals can be posted to the general ledger, helping to maintain an accurate record of the company's financial transactions and aiding in the preparation of financial statements. They ensure that there is a clear and organized way to track and analyze cash flow.