Record Cash Payments Alongside Your Other Sales
Record customer cash payments when received, with enough detail to connect the receipt to the sale or invoice. Keep a cash receipt record even if the money is not immediately deposited. Depositing the cash later is normally a movement of already recorded money, not a second sale.
Create a traceable receipt record
Include the date, amount, purpose and invoice or receipt reference. Use a consistent receipt numbering or sales record system. If the customer pays part of an invoice, apply the amount to that invoice and leave the remaining balance visible. Keep personal cash separate from business receipts.
Track what happens before deposit
A business might receive $300 in cash and use $40 for a documented business purchase before depositing $260. The records need to explain the $300 received, the $40 spent and the $260 deposited. Recording only the deposit would omit part of the sales activity and the expense. This illustration assumes no other adjustments.
Reconcile cash as well as the bank
Compare the recorded cash balance with a physical count and investigate differences. Use receipts for cash expenses and document authorized cash movements. Match deposits to the corresponding receipt batch so income is not duplicated. The IRS describes daily cash receipt records and supporting documents as part of a recordkeeping system. Paper Trail can help organize the trail from sale to receipt to deposit, making cash activity easier to verify.