How do I create a record of cash sales when nothing generates a receipt, invoice or statement?

You are required to keep records that establish your sales — including the cash ones nobody documents for you

A registered sales tax vendor is required to keep accurate records of all sales and all purchases it makes. (jurisdiction: New York State, United States, entity_scope: registered New York State sales tax vendors, effective_from: 2011-06-02)

“As a registered sales tax vendor, you are required to keep accurate records of all sales and purchases that you make.”

Where no written document is given to the purchaser, the vendor must keep a detailed daily record of all cash and credit sales in a daybook or similar journal. (jurisdiction: New York State, United States, entity_scope: registered New York State sales tax vendors, effective_from: 2011-06-02, conditions: applies where no written document is given to the purchaser)

“If no written document is given to the purchaser, you must keep a detailed daily record of all cash and credit sales in a daybook or similar journal.”

A holder of a California seller's permit is required to maintain business records to verify that the holder has properly paid tax. (jurisdiction: California, United States, entity_scope: holders of a California seller's permit, conditions: publication summarises the law and regulations in effect when written (Revision September 2018); the law governs in any conflict)

“If you hold a California seller’s permit, you are required to maintain business records to verify that you have properly paid tax.”

A lack of complete, accurate records may be considered negligence or intent to evade the tax on the taxpayer's part, and the taxpayer may have to pay penalties as a result. (jurisdiction: California, United States, entity_scope: California sales and use tax taxpayers addressed by the publication, conditions: stated as a possible consequence ("may be considered", "may have to pay"), not an automatic one)

“In addition, a lack of complete, accurate records may be considered negligence or intent to evade the tax on your part, and you may have to pay penalties as a result.”

A vendor must make its records available to the Tax Department upon request. (jurisdiction: New York State, United States, entity_scope: registered New York State sales tax vendors, effective_from: 2011-06-02)

“You must make the records available to the Tax Department upon request.”

If a vendor's records are considered inadequate, the vendor may be subject to an estimated audit methodology to determine additional taxes due, may be subject to penalties and interest if additional tax is found due, may be subject to criminal penalties if it willfully failed to maintain proper records, and may have its Certificate of Authority suspended or revoked. (jurisdiction: New York State, United States, entity_scope: registered New York State sales tax vendors, effective_from: 2011-06-02, conditions: applies where the records are considered inadequate)

“If your records are considered inadequate, you may: be subject to an estimated audit methodology to determine any additional taxes due, be subject to penalties and interest if additional tax is found to be due, be subject to criminal penalties if you willfully failed to maintain proper records, and have your Certificate of Authority suspended or revoked.”

The record has to be made when the sale happens, not written up later from the bank and memory

See Where no written document is given to the purchaser, the vendor must keep a detailed daily record of all cash and credit sales in a daybook or similar journal.

All of a vendor's records must be dated and kept in good order. (jurisdiction: New York State, United States, entity_scope: registered New York State sales tax vendors, effective_from: 2011-06-02)

“All of your records must be dated and kept in good order.”

The recommended procedure is that, when the daily mail arrives, all checks and cash received are recorded on a mailroom check receipts list, with each check entered showing the payer's name, the check number and the amount paid. (jurisdiction: United States (US publisher and US check-handling practice; the article states no other jurisdiction), entity_scope: businesses receiving checks and cash through a mailroom, conditions: applies to receipts arriving in the daily mail delivery)

“When the daily mail delivery arrives, record all received checks and cash on the mailroom check receipts list. For each check received, state on the form the name of the paying party, the check number and the amount paid.”

The person completing the mailroom check receipts list should sign it and state the date on which the checks and cash were received. (jurisdiction: United States (US publisher and US check-handling practice; the article states no other jurisdiction), entity_scope: businesses receiving checks and cash through a mailroom)

“Sign the form and state the date on which the checks and cash were received.”

If the CDTFA audits an account and finds the records are not adequate, the CDTFA will use standard accounting methods to determine how much tax should have been paid. (jurisdiction: California, United States, entity_scope: accounts audited by the CDTFA, conditions: applies where an audit occurs and records are found not adequate)

“If the CDTFA audits your account and finds that your records are not adequate, we will use standard accounting methods to determine how much tax you should have paid.”

Not established from an authoritative source.

Required authority: high quality professional secondary reference, primary regulator or government. Highest achieved: high quality professional secondary reference, primary regulator or government.

What a hand-made cash-sales record is, and what makes it stand up as evidence of income

See Where no written document is given to the purchaser, the vendor must keep a detailed daily record of all cash and credit sales in a daybook or similar journal.

A source document captures the key information about a transaction, such as (open list) the names of the parties involved, amounts paid if any, the date, and the substance of the transaction. (jurisdiction: United States, entity_scope: businesses generally (no entity type stated), conditions: list is illustrative ('such as'), not exhaustive; amounts paid stated as '(if any)')

“A source document captures the key information about a transaction, such as the names of the parties involved, amounts paid (if any), the date, and the substance of the transaction.”

Source documents are critical to auditors, who use them as evidence that recorded transactions actually occurred. (jurisdiction: United States, entity_scope: auditors of businesses generally)

“Source documents are critical to auditors , who use them as evidence that recorded transactions actually occurred.”

A cash receipts journal is a subsidiary ledger in which cash sales are recorded. (jurisdiction: United States (article of a US accounting CPE publisher; the text itself names no jurisdiction), entity_scope: Businesses that maintain a cash receipts journal)

“A cash receipts journal is a subsidiary ledger in which cash sales are recorded.”

Among the listed circumstances in which records may be considered inadequate is that an evaluation of the accounting system discloses that it does not provide adequate internal control procedures assuring the accuracy and completeness of the transactions recorded in the books and records — examples given being the lack of sequentially numbered invoices or guest checks, or the lack of dates on receipts. (jurisdiction: New York State, United States, entity_scope: registered New York State sales tax vendors, effective_from: 2011-06-02, conditions: one of a list of circumstances in which records may be considered inadequate; items in parentheses are examples)

“an evaluation of your accounting system discloses that the system does not provide adequate internal control procedures which assure the accuracy and completeness of the transactions recorded in the books and records (e.g., the lack of sequentially numbered invoices or guest checks, or the lack of dates on receipts).”

Partly established. Established: what a contemporaneous cash-sales record must contain (S15). Missing: the characteristics that make a manually created sales record credible as evidence of income.

What a single entry must contain so one sale can be identified and proved afterwards

See The person completing the mailroom check receipts list should sign it and state the date on which the checks and cash were received.

See A source document captures the key information about a transaction, such as (open list) the names of the parties involved, amounts paid if any, the date, and the substance of the transaction.

A vendor must keep records of every sale, of the amount of the sale, and of the sales tax on the sale. (jurisdiction: New York State, United States, entity_scope: registered New York State sales tax vendors, effective_from: 2011-06-02)

“You must keep records of every sale, the amount of the sale, and the sales tax on the sale.”

A vendor selling both taxable and nontaxable goods or services must identify on the invoice or receipt which of the items sold are subject to sales tax and which are not. (jurisdiction: New York State, United States, entity_scope: registered New York State sales tax vendors selling both taxable and nontaxable goods or services, effective_from: 2011-06-02, conditions: applies where the vendor sells both taxable and nontaxable goods or services)

“If you sell both taxable and nontaxable goods or services, you must identify which of the items you sell are subject to sales tax and which are not on the invoice or receipt.”

Among the listed circumstances in which records may be considered inadequate is that they do not provide details of each individual transaction; summary reports and daily summary or 'Z' tapes are not sufficient. (jurisdiction: New York State, United States, entity_scope: registered New York State sales tax vendors, effective_from: 2011-06-02, conditions: one of a list of circumstances in which records may be considered inadequate)

“they don't provide details of each individual transaction (summary reports and daily summary or “Z” tapes are not sufficient),”

Partly established. Established: what was sold (S11); the amount (S11, S15); any tax collected (S15); the date (S11). Missing: who recorded it.

The shapes the record can take — a numbered book, a daily sheet, or an electronic record

The cash receipts journal is most commonly found in manual accounting systems, and the concept is essentially invisible in many (not stated to be all) accounting software packages. (jurisdiction: United States (article of a US accounting CPE publisher; the text itself names no jurisdiction), entity_scope: Businesses using manual accounting systems; accounting software packages generally, conditions: stated as a general tendency ("most commonly", "many"), not as universal)

“The cash receipts journal is most commonly found in manual accounting systems . The concept is essentially invisible in many accounting software packages.”

The sales journal is used primarily in manual accounting systems and in specialised accounting software, to record recurring credit sales. (jurisdiction: Not stated; general double-entry bookkeeping practice as described by a US-based publisher (AccountingTools, Inc.), entity_scope: Entities using manual accounting systems or specialised accounting software, platform: Generic categories of system; no named product, conditions: stated as the primary, not the exclusive, setting)

“The sales journal is used primarily in manual accounting systems and specialized accounting software to record recurring credit sales.”

The functions of the sales journal also appear in enterprise resource planning systems, billing platforms, point-of-sale systems and accounts receivable modules. (jurisdiction: Not stated; general double-entry bookkeeping practice as described by a US-based publisher (AccountingTools, Inc.), entity_scope: Entities using ERP, billing, point-of-sale or accounts receivable systems, platform: Generic categories of system; no named product)

“Its functions also appear in enterprise resource planning systems, billing platforms, point-of-sale systems, and accounts receivable modules.”

The article states that a well-run accounting system should have a clear audit trail for all transactions. (jurisdiction: Not jurisdiction-specific; US-published general accounting reference (AccountingTools, US CPE provider), entity_scope: accounting systems described as well-run)

“A well-run accounting system should have a clear audit trail for all transactions.”

Where computerized audit logs automatically record all transactions, giving anyone access to the logs means transactions can be modified or deleted, obscuring what actually happened and making it much easier to commit fraud. (jurisdiction: Not jurisdiction-specific; US-published general accounting reference (AccountingTools, US CPE provider), entity_scope: businesses using computerized audit logs that automatically record all transactions, conditions: applies where access to the logs is given)

“Risk of fraudulent modification . A further concern is when computerized audit logs are used that automatically record all transactions; if anyone is given access to the logs, then transactions can be modified or deleted, obscuring what actually happened and making it much easier to commit fraud.”

Not established from an authoritative source.

The four tests any record form has to pass: every sale, unbroken sequence, no silent alteration, retrievable later

See Among the listed circumstances in which records may be considered inadequate is that an evaluation of the accounting system discloses that it does not provide adequate internal control procedures assuring the accuracy and completeness of the transactions recorded in the books and records — examples given being the lack of sequentially numbered invoices or guest checks, or the lack of dates on receipts.

See The article states that a well-run accounting system should have a clear audit trail for all transactions.

See Where computerized audit logs automatically record all transactions, giving anyone access to the logs means transactions can be modified or deleted, obscuring what actually happened and making it much easier to commit fraud.

An audit trail can be followed in reverse, tracking backwards from a financial statement line item to the source document that originated it. (jurisdiction: Not jurisdiction-specific; US-published general accounting reference (AccountingTools, US CPE provider), entity_scope: entities with an accounting system generally, as described by the article)

“The audit trail can be used in reverse, to track backwards from a financial statement line item to the originating source document.”

Digital records are widely accepted for accounting and auditing purposes, provided they are accurate, complete and securely stored. (jurisdiction: United States, entity_scope: businesses generally (no entity type stated), conditions: acceptance hedged as 'widely accepted', not universal; conditioned on the records being accurate, complete and securely stored)

“Digital records are widely accepted for accounting and auditing purposes, provided they are accurate, complete, and securely stored.”

Partly established. Established: that the record form captures every sale (S02); that it can be retrieved later (S42). Missing: that its sequence can be shown to be unbroken; that it cannot be altered without trace; the recognised shapes of record measured against those criteria.

Required authority: high quality professional secondary reference. Highest achieved: high quality professional secondary reference, primary regulator or government.

Showing the record is complete rather than a selection: sequence, gaps and every trading day

See Where no written document is given to the purchaser, the vendor must keep a detailed daily record of all cash and credit sales in a daybook or similar journal.

See A lack of complete, accurate records may be considered negligence or intent to evade the tax on the taxpayer's part, and the taxpayer may have to pay penalties as a result.

See The recommended procedure is that, when the daily mail arrives, all checks and cash received are recorded on a mailroom check receipts list, with each check entered showing the payer's name, the check number and the amount paid.

See Among the listed circumstances in which records may be considered inadequate is that an evaluation of the accounting system discloses that it does not provide adequate internal control procedures assuring the accuracy and completeness of the transactions recorded in the books and records — examples given being the lack of sequentially numbered invoices or guest checks, or the lack of dates on receipts.

See A vendor must keep records of every sale, of the amount of the sale, and of the sales tax on the sale.

Partly established. Established: sequence control (S14). Missing: accounting for spoiled or unused entries; covering every trading period including those with no sales.

Required authority: high quality professional secondary reference. Highest achieved: primary regulator or government.

Completeness and handling controls when cash passes through more than one pair of hands

See The recommended procedure is that, when the daily mail arrives, all checks and cash received are recorded on a mailroom check receipts list, with each check entered showing the payer's name, the check number and the amount paid.

Employees who receive cash or checks from customers should not also be the ones who record those transactions in the accounting system. (jurisdiction: not stated in the document; general accounting-concept article published by US-based AccountingTools, Inc., entity_scope: businesses generally; illustrative example, conditions: given as an example, not as a requirement)

“Employees who receive cash or checks from customers should not be the same ones responsible for recording the transactions in the accounting system.”

Where one person both receives cash and records the transactions, that person could pocket funds and adjust the books to conceal it; separating the two duties increases transparency and allows cross-verification. (jurisdiction: not stated in the document; general accounting-concept article published by US-based AccountingTools, Inc., entity_scope: businesses generally; illustrative cash-handling example, conditions: hedged: "could")

“If one person controls both functions, they could pocket some of the funds and adjust the books to cover it up. Separating these duties increases transparency and allows for cross-verification.”

The cashier matches the items received against the mailroom check receipt list, initials a copy of the list and sends that copy back to the mailroom, where staff file the initialled copy by date - so the handover between the two people is evidenced and retained. (jurisdiction: United States (US publisher; the article states no other jurisdiction), entity_scope: businesses with a mailroom separate from an accounting department cashier, conditions: requires two separate parties (mailroom staff and cashier))

“The cashier matches all items in the pouch to the mailroom check receipt list, initials a copy of the list, and returns the copy by interoffice mail to the mailroom. The mailroom staff then files the initialed copy by date.”

Partly established. Established: sequence control (S14); the division of responsibility where several people take cash (S25, S26, S30). Missing: the completeness controls recognised for manually recorded cash sales in a small business; the handling controls recognised for manually recorded cash sales in a small business.

Sizing the controls for a small business where several people take money

See Where one person both receives cash and records the transactions, that person could pocket funds and adjust the books to conceal it; separating the two duties increases transparency and allows cross-verification.

See The cashier matches the items received against the mailroom check receipt list, initials a copy of the list and sends that copy back to the mailroom, where staff file the initialled copy by date - so the handover between the two people is evidenced and retained.

Segregation of duties is more difficult to accomplish in a smaller organization, because there are too few people to effectively shift tasks to different people. (jurisdiction: not stated in the document; general accounting-concept article published by US-based AccountingTools, Inc., entity_scope: smaller organizations)

“The segregation of duties is more difficult to accomplish in a smaller organization, where there are too few people to effectively shift tasks to different people.”

Regular reconciliation performed by a third party further deters misappropriation of cash receipts. (jurisdiction: not stated in the document; general accounting-concept article published by US-based AccountingTools, Inc., entity_scope: businesses generally; illustrative cash-handling example, conditions: reconciliation performed by a third party; performed regularly)

“Regular reconciliation by a third party further deters misappropriation.”

The bank issues a receipt for the checks and cash deposited, and a person other than the cashier should compare that bank receipt with the amount on the deposit slip and reconcile any differences - a division of duty between the person handling the money and the person checking it. (jurisdiction: United States (US publisher; the article states no other jurisdiction), entity_scope: businesses with at least one person available other than the cashier, conditions: requires a second person independent of the cashier)

“Upon receipt of the checks and cash, the bank issues a receipt for it. Someone other than the cashier should compare this receipt to the amount on the deposit slip and reconcile any differences.”

Not established from an authoritative source.

How the entries become a period total in the books

See A cash receipts journal is a subsidiary ledger in which cash sales are recorded.

The balance held in the cash receipts journal is regularly summarized into a single aggregate amount, and it is that aggregate amount that is posted to the general ledger. (jurisdiction: United States (article of a US accounting CPE publisher; the text itself names no jurisdiction), entity_scope: Businesses that maintain a cash receipts journal alongside a general ledger)

“The balance in the cash receipts journal is regularly summarized into an aggregate amount and posted to the general ledger.”

A cash receipts journal centralizes all cash inflows, an open list that includes customer payments, cash sales, interest income and other cash receipts. (jurisdiction: United States (article of a US accounting CPE publisher; the text itself names no jurisdiction), entity_scope: Businesses that maintain a cash receipts journal, conditions: list introduced by "including" and is not closed)

“A cash receipts journal centralizes all cash inflows, including customer payments, cash sales, interest income, and other cash receipts.”

Required authority: authoritative professional or accounting standard. Highest achieved: high quality professional secondary reference.

Why the income figure comes from the record, and the deposit is only checked against it

See A cash receipts journal is a subsidiary ledger in which cash sales are recorded.

See The balance held in the cash receipts journal is regularly summarized into a single aggregate amount, and it is that aggregate amount that is posted to the general ledger.

Rather than every individual sale being recorded in the general ledger, summary totals from the sales journal are posted to it periodically, which reduces general ledger entries. (jurisdiction: Not stated; general double-entry bookkeeping practice as described by a US-based publisher (AccountingTools, Inc.), entity_scope: Entities keeping a sales journal as a subsidiary ledger alongside a general ledger)

“Reduces general ledger entries . Instead of recording every sale in the general ledger, summary totals from the sales journal are posted periodically.”

Required authority: authoritative professional or accounting standard. Highest achieved: high quality professional secondary reference.

Where a difference between the record and the cash actually goes

The cash over and short account is described as a general ledger account that stores the amount by which the actual ending cash balance differs from the beginning book balance of cash on hand adjusted for the recorded cash transactions of the period. (jurisdiction: United States (US-oriented general accounting guidance by a US CPE publisher; examples in US dollars), entity_scope: entities maintaining a general ledger and holding cash on hand)

“The cash over and short account is an account in the general ledger . The account stores the amount by which the actual ending cash balance differs from the beginning book balance of cash on hand, plus or minus any recorded cash transactions during the period.”

The account's primary use is said to be in cash-intensive retail or banking environments and for petty cash handling, and in those cases cash variances should be stored in a single, easily-accessible account. (jurisdiction: United States (US-oriented general accounting guidance by a US CPE publisher; examples in US dollars), entity_scope: cash-intensive retail or banking environments, and petty cash handling, conditions: stated as the primary, not the only, use; applies "in these cases", i.e. the cash-intensive and petty cash situations described)

“The primary use of the cash over and short account is in cash-intensive retail or banking environments, as well as for the handling of petty cash . In these cases, cash variances should be stored in a single, easily-accessible account.”

In the article's example, the cash shortfall is recorded as a debit to the cash over and short account, an expense, and a credit to the petty cash or cash account, reducing the asset. (jurisdiction: United States (US-oriented general accounting guidance by a US CPE publisher; example denominated in US dollars), entity_scope: illustrative example of a petty cash box shortage, conditions: presented as an example entry, not as a stated requirement)

“This cash shortfall is recorded as a debit to the cash over and short account (which is an expense) and a credit to the petty cash or cash account (which is an asset reduction).”

In the article's example, had there instead been too much cash in the petty cash box, the entry would be reversed: a debit to cash and a credit to the cash over and short account. (jurisdiction: United States (US-oriented general accounting guidance by a US CPE publisher; example denominated in US dollars), entity_scope: illustrative example of a petty cash box overage, conditions: presented as an alternative case within an example, not as a stated requirement; the article describes an overage as a rare condition)

“Alternatively, if there had been too much cash in the petty cash box (a rare condition indeed!), the entry would be reversed, with a debit to cash and a credit to the cash over and short account.”

Checking the record against the cash counted and the cash banked, and recording the difference instead of absorbing it

See In the article's example, the cash shortfall is recorded as a debit to the cash over and short account, an expense, and a credit to the petty cash or cash account, reducing the asset.

In the article's illustrative example, a shortage is identified by counting the cash and receipts actually in the petty cash box ($45 cash plus $135 of receipts, totalling $180) and comparing that total with the standard balance the box should contain ($200), leaving $20 missing. (jurisdiction: United States (US-oriented general accounting guidance by a US CPE publisher; example denominated in US dollars), entity_scope: illustrative example of a petty cash box subject to a monthly controller review, conditions: presented as an example, not as a requirement; figures are illustrative)

“A controller conducts a monthly review of a petty cash box that should contain a standard cash balance of $200. He finds that the box contains $45 of cash and $135 of receipts, which totals only $180. Therefore, $20 of cash is missing.”

All checks and cash should be recorded on a deposit slip, and the deposit slip total compared with the total on the mailroom check receipts list, with any differences reconciled. (jurisdiction: United States (US publisher; deposit-slip banking practice; the article states no other jurisdiction), entity_scope: businesses banking checks and cash received)

“Record all checks and cash on a deposit slip . Compare the total on the deposit slip to the amount stated on the mailroom check receipts list, and reconcile any differences.”

Discrepancies in the cash receipts process are investigated by tracing amounts from source documents through the accounting records and comparing them with bank deposits; stated possible causes include missing documentation, posting mistakes, and timing differences between receipt and deposit. (jurisdiction: United States (US publisher; the article states no other jurisdiction), entity_scope: businesses operating a cash receipts process, conditions: causes listed are possible ('may stem from'), not exhaustive)

“Discrepancies are investigated by tracing amounts from source documents through the accounting records and comparing them to bank deposits. Errors may stem from missing documentation, posting mistakes, or timing differences between receipt and deposit.”

Partly established. Established: how the record is checked against the amount banked (S40, S41); how a difference between them is recorded rather than absorbed into the sales figure (S35). Missing: how the record is checked against the cash actually on hand.

Required authority: authoritative professional or accounting standard, high quality professional secondary reference. Highest achieved: high quality professional secondary reference.

Keeping the record retrievable so you can produce a past period on request

See A vendor must make its records available to the Tax Department upon request.

See Digital records are widely accepted for accounting and auditing purposes, provided they are accurate, complete and securely stored.

Once a source document's information has been recorded in the accounting system, the source document is indexed for easy access and archived. (jurisdiction: United States, entity_scope: businesses generally (no entity type stated), conditions: applies after the information has been recorded in the accounting system)

“Once the information in a source document has been recorded in the accounting system, the source document is indexed for easy access and archived.”

For evidentiary purposes electronic images of source documents are generally acceptable, though paper-based documentation may still be required in some cases. (jurisdiction: United States, entity_scope: businesses generally (no entity type stated), conditions: hedged ('generally acceptable'); paper may still be required in unspecified cases)

“For evidentiary purposes, electronic images of source documents are generally acceptable, though paper-based documentation may still be required in some cases.”

Where records are maintained in an electronic format, all the requirements for paper records also apply to records created and stored electronically. (jurisdiction: New York State, United States, entity_scope: registered New York State sales tax vendors maintaining records in electronic format, effective_from: 2011-06-02, conditions: applies where records are maintained in an electronic format)

“If you maintain records in an electronic format, all the requirements for paper records also apply to records created and stored electronically.”

Records maintained in an electronic format must be made available to the Tax Department in an electronically readable form. (jurisdiction: New York State, United States, entity_scope: registered New York State sales tax vendors maintaining records in electronic format, effective_from: 2011-06-02, conditions: applies where records are maintained in an electronic format)

“Records that are maintained in an electronic format must be made available to the Tax Department in an electronically readable form.”

Partly established. Established: that the record must be retained (S07, S42); that the record remain retrievable in a form that can be produced later (S05, S42, S45). Missing: what that requirement demands of each recognised record shape.