Cash flow journal entries are crucial for tracking the movement of cash in and out of a business. These entries help in managing cash flow and ensuring that the business maintains sufficient liquidity to meet its obligations.
1. Cash Inflows
These entries record the cash received by the business, such as from sales, loans, or investments.
2. Cash Outflows
These entries record the cash paid out by the business, such as for expenses, purchases, or loan repayments.
Example Cash Flow Journal Entries
1. Cash Sales
Example: ₹15,000 on 01-07-2024
Date
Account Title
Debit (INR)
Credit (INR)
Description
01-07-2024
Cash
15,000
Cash received from sales
01-07-2024
To Sales Revenue
15,000
Revenue from cash sales
2. Receiving Loan
Example: ₹1,00,000 on 02-07-2024
Date
Account Title
Debit (INR)
Credit (INR)
Description
02-07-2024
Cash
1,00,000
Loan received
02-07-2024
To Loan Payable
1,00,000
Loan liability
3. Cash Purchase of Inventory
Example: ₹20,000 on 03-07-2024
Date
Account Title
Debit (INR)
Credit (INR)
Description
03-07-2024
Inventory
20,000
Purchased inventory
03-07-2024
To Cash
20,000
Paid in cash
4. Paying Salaries
Example: ₹15,000 on 04-07-2024
Date
Account Title
Debit (INR)
Credit (INR)
Description
04-07-2024
Salaries Expense
15,000
Salaries paid
04-07-2024
To Cash
15,000
Paid in cash
5. Repaying Loan
Example: ₹10,000 on 05-07-2024
Date
Account Title
Debit (INR)
Credit (INR)
Description
05-07-2024
Loan Payable
10,000
Loan repayment
05-07-2024
To Cash
10,000
Cash paid
6. Paying Utility Bills
Example: ₹3,000 on 06-07-2024
Date
Account Title
Debit (INR)
Credit (INR)
Description
06-07-2024
Utilities Expense
3,000
Utility bill for the month
06-07-2024
To Cash
3,000
Paid in cash
7. Receiving Payment from Customers
Example: ₹25,000 on 07-07-2024
Date
Account Title
Debit (INR)
Credit (INR)
Description
07-07-2024
Cash
25,000
Payment received from customers
07-07-2024
To Accounts Receivable
25,000
Customer payment
8. Paying Rent
Example: ₹10,000 on 08-07-2024
Date
Account Title
Debit (INR)
Credit (INR)
Description
08-07-2024
Rent Expense
10,000
Rent for the month
08-07-2024
To Cash
10,000
Paid in cash
9. Interest Received
Example: ₹2,000 on 09-07-2024
Date
Account Title
Debit (INR)
Credit (INR)
Description
09-07-2024
Cash
2,000
Interest received
09-07-2024
To Interest Income
2,000
Income from interest
10. Paying Insurance Premium
Example: ₹5,000 on 10-07-2024
Date
Account Title
Debit (INR)
Credit (INR)
Description
10-07-2024
Prepaid Insurance
5,000
Insurance premium paid
10-07-2024
To Cash
5,000
Paid in cash
Conclusion
Maintaining accurate cash flow journal entries is vital for tracking the financial health of a business. These entries provide a clear picture of how cash is moving within the business, helping in effective cash management and ensuring that the business can meet its short-term and long-term obligations.
