Which statement about the cash receipts journal is true?

Which statement about the cash receipts journal is true?

• A. It provides the initial record of cash received.
• B. It records only disbursements.
• C. It is not a book of original entry.
• D. It records petty cash transactions only.

Answer: (A)

The main idea is that the cash receipts journal is the initial record for cash coming into the organization. Each time cash is received, a transaction is entered here first, debiting Cash and crediting the appropriate source account (like revenue, accounts receivable, or other receivable). This establishes the audit trail for cash inflows before postings to the general ledger. Why this is the best description: it emphasizes that cash receipts are recorded at the outset in this journal, capturing the inflow and its source. Other options describe functions of different journals or subledgers: disbursements are handled in a cash disbursements journal, not the receipts journal; the receipts journal is indeed a book of original entry, so saying it is not would be incorrect; and petty cash transactions are typically tracked in a separate petty cash book or subledger, not exclusively in the cash receipts journal.

The main idea is that the cash receipts journal is the initial record for cash coming into the organization. Each time cash is received, a transaction is entered here first, debiting Cash and crediting the appropriate source account (like revenue, accounts receivable, or other receivable). This establishes the audit trail for cash inflows before postings to the general ledger.

Why this is the best description: it emphasizes that cash receipts are recorded at the outset in this journal, capturing the inflow and its source. Other options describe functions of different journals or subledgers: disbursements are handled in a cash disbursements journal, not the receipts journal; the receipts journal is indeed a book of original entry, so saying it is not would be incorrect; and petty cash transactions are typically tracked in a separate petty cash book or subledger, not exclusively in the cash receipts journal.