In SmartRec, our cash accounting solution posts journal entries when payments are received, recognizes revenue once payments are reconciled, and records revenue adjustments to ledger accounts when credits (credit memos) are created or used.
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Cash journal entries are written when:
✅Payment/Refund/Account deposit is made
✅Reconciliation happens
✅Reconciliation deletion happens
✅Credit is created
💡 Revenue is recognized once a payment is reconciled to an invoice item.
Cash journal entries are not written when:
✖️ Invoice is created (except for gift card sales)
✖️ Service is rendered
✖️ Multipass is used or expires
❗ Nothing is deferred because revenue is recorded once a payment is reconciled.
1. Cash-basis journal entry scenarios
In cash accounting, the reconciliation references the payment reference (not the invoice reference). We'll explain how select billing events generate cash-basis journal entries (using your custom revenue and system-generated ledger accounts) such as:
When making a payment
Cash-basis journal entries are generated when payments are entered in SmartRec. However, revenue isn`t recognized just yet.
When a payment is entered, Payment entries are generated:
1- To show amounts received, a debit is posted to the Asset-Cash ledger account.
2- Until the amount is reconciled to an invoice item, a credit is posted to the Liability-Account deposit ledger account.
🎗️ In accrual, journal entries are first generated when the invoice is created, with revenue recognized immediately, or deferred. Click here for examples.
When a payment is reconciled
In cash accounting, revenue is recognized when a payment is reconciled to an invoice item. In addition, any applicable sales tax (e.g., GST, PST, etc.,) is posted to the appropriate sales tax account.
When a payment is reconciled, Reconciliation entries are generated:
1- When amounts are moved as a result of reconciliation, a debit is posted to the Liability-Account deposit ledger account.
2- When revenue is recognized, a credit is posted to the item's revenue ledger account.
3- If sales tax applies, a credit is posted to the item's Liability-Sales tax account(s).
🎗️ In accrual, reconciled payments reduce Accounts receivable but do not post to revenue, because revenue is only recognized when the invoice is issued and the service has been delivered. Click here for an example.
When a reconciliation is deleted
A reconciliation is deleted when two transactions (invoice, payment, credit memo, refund) that are reconciled become unlinked.
This can happen for several reasons, such as:
A failed ACH payment
A payment cancellation
An invoice cancellation, followed by a refund
A manual reconciliation deletion/adjustment (as seen below)
In cash accounting, on the day the reconciliation status has changed, the related revenue is reversed. This is effective on the day it happens, and can't be backdated. This generates Reconciliation deleted entries:
1- On the day the reconciliation status changes, a debit is posted to the item's revenue ledger account. Revenue isn't recognized anymore.
2- If sales taxes were applied, a debit is posted to the item's Liability-Sales tax account(s). Amounts due on sales tax aren't recognized either.
3- Unreconciled payments always post a credit to the Liability-Account deposit ledger account.
🎗️ In accrual, the reconciliation doesn't impact revenue recognition. It simply debits Accounts receivable and credits Account deposit.
When you create a credit or give a rebate in Client Billing
In cash accounting, when you create a credit or give a rebate in Client Billing, it generates Credit memo entries:
A debit is posted to the revenue account linked to the credit.
A credit is posted to the Liability-Account deposit account.
1- A credit memo reduces your revenue. This posts a debit to the revenue account associated to the credit.
2- If tax applies to the credit, this posts a debit to the Liability-Sales tax account.
3- When an amount isn't reconciled, this posts a credit to the Liability-Account deposit account.
When a credit is used to pay for something
In cash accounting, when a credit is used to purchase another item:
A debit is posted to the Liability-Account deposit account.
A credit is posted to the new item's revenue account.
💡 This credit tracking ensures revenue adjusts from the original revenue account to the new revenue account of the item the credit is used to pay for.
When a credit exists in the client's account, it can be used as payment at checkout.
A credit of $5 is used as payment on a purchase of $50+tx
When the payment is made, it generates Payment entries. When the payment is reconciled, it generates Reconciliation entries:
1- A payment is received. This posts a debit to the Asset-Cash account.
2- The payment amount is not reconciled yet. This posts a credit to the Liability-Account deposit account.
3- Now the payment amounts are reconciled. This posts a debit to the Liability-Account deposit account.
4- Upon reconciliation, revenue is recognized (minus the credit and applicable sales tax). This posts a credit to the item's revenue account.
5- If tax applies on the item, this posts a credit to the Liability-Sales tax account.
6- When a credit is reconciled with an item, this posts a debit to the Liability-Account deposit account.
7- The portion of the credit that is used towards the item's balance posts a credit to the item's revenue account.
8- If tax applies on the credit, this posts a credit to the Liability-Sales tax account.
When you add a custom rebate to an invoice at checkout
In cash accounting, when you add a custom rebate at checkout:
A debit is posted to the revenue ledger account linked to the custom rebate.
The custom rebate is recorded in the Reconciliation journal entries generated after the payment is applied to the invoice. The rebate is automatically linked to the item’s revenue account.
A custom rebate of $3+tx is applied to an invoice of $10+tx at checkout. Paid in full.
1- When an amount is reconciled, it posts a debit to the Liability-Account deposit account.
2- The rebate reduces your revenue. It posts a debit to the revenue account associated to the rebate.
3- The value of the sale (before rebates and taxes) is recognized. This posts a credit to the item's revenue account.
4- If sales tax applies to the rebate, this posts a credit to the Liability-Sales tax account.
When an automated discount is applied
Discounts reduce the price charged to the client (including applicable taxes). Discounts don't appear in journal entries because cash accounting doesn't show invoice entries (except for gift cards).
💡 In cash accounting, discounts reduce revenue
by posting a debit in the item's revenue ledger account.
In cash accounting, when a payment is reconciled with a discounted invoice item, this generates Reconciliation journal entries:
1- A debit is posted to the Liability-Account deposit ledger account for the purchase amount (minus the discount).
2- A debit is posted to the item's revenue ledger account, for the discount amount. This is because discounts reduce your revenue.
3- A credit is posted to the item's revenue ledger account, for the purchase amount (minus the discount and applicable taxes). This shows the revenue recognized.
4- If taxes were applied on the item, a credit is posted to the item's Liability-Sales tax account(s).
🎗️ In accrual, discounts also reduce the item amount and applicable taxes owed. You can track discounts in a contra-revenue account or as a sales debit in the item’s revenue account (similar to cash-basis). Click here for examples.
When a multipass is purchased and used
In cash accounting, revenue from a multipass is recorded on payment of purchase. When each token is used, no new journal entries are written. If it expires, no new journal entries are written either.
In cash accounting, when you reconcile a payment to a multipass, it generates Reconciliation journal entries:
Below, a multipass is purchased and is paid in full (cash basis)
1- A payment is reconciled. This posts a debit to the Liability-Account deposit ledger account for the payment amount.
2- When a payment is reconciled, revenue is recognized. This posts a credit to the item's revenue ledger account for up to the item amount (minus taxes).
3- If a portion of the payment goes to taxes, this posts a credit to the item's Liability-Sales tax account(s).
❗ Remember - in cash accounting, revenue on a multipass is recorded on payment only. No other journal entries are written when the multipass is used or expired.
🎗️ In accrual, multipass revenue is deferred, with a proportional amount of revenue recognized each time a pass is used. If a multipass expires before all its passes are redeemed, the remaining value is recognized upon expiry.
Click here to see multipass journal entry scenarios in accrual.
When a gift card is purchased and used
Gift cards are recognized as revenue when used to make a purchase. Until then, they
are liabilities (your organization owes a gift card credit) and need to be written as such upon initial purchase. Otherwise, you would have $200 of revenue for a $100 sale.
💡 In cash accounting, Gift cards will create Invoice type journal entries.
When a gift card is purchased and paid for, this generates Invoice (exceptionally) and Payment journal entries.
A gift card is purchased, paid for, & then used to pay for a fundraising event
Invoice - The gift card purchase
1- A gift card is sold. This posts a debit to Asset-Accounts receivable.
2- Since a gift card might not be used, its sale is recorded as a liability. This posts a credit to the Liability-Gift cards ledger account.
Payment - Payment is received in full
3- A payment is made. This posts a debit to Asset-Cash.
4- When a payment is unreconciled, this posts a credit to Liability-Account deposit.
Reconciliation - Payment amount reconciled to invoice item
5- When a payment is reconciled, this posts a debit is to Liability-Account deposit.
6- When a payment is reconciled, this posts a credit to Asset-Accounts receivable.
Payment - The gift card is used to buy something
7- When you buy an item using a gift card, this posts a debit to Liability-Gift cards.
8- When you use the gift card, it's a receipt of payment. This posts a credit to Liability-Account deposit.
Reconciliation - Gift card payment reconciled to an invoice item
9- Upon a reconciliation, this posts a debit to Liability-Account deposit.
10- When reconciled, revenue is posted to the item`s revenue account.
2. Cash accounting reports for journal entries
Admins with the Accounting reports permission can view journal entries and the journal entries summary in the Reports tab, under the Cash accounting section.
❗ Only custom revenue and system-generated
ledger accounts used in cash accounting appear in this report.
(e.g., discount accounts are excluded because
transactions aren't posted to those accounts on a cash-basis).
Both reports are both available for a maximum range of 12 months
Journal entries for Cash accounting
The Journal entries report for Cash accounting is provided as a downloadable Excel file. If new transactions occur after you download it, you’ll need to download the report again to include the most up-to-date activity.
💸 Perks of journal entries for cash vs Payment by item report
Tracks scholarship payments with more clarity
JE's for cash facilitate tracking the flow of credits (with the help of the Account deposit ledger account). The Payment by item report cannot.
While the Payment by item report shows live data with currently used ledger accounts, journal entries are a historical source of truth that don't change even if reconciliation is changed.
The report lists older transactions first, with newer transactions at the end.
Effective date: The date and time an event took place. Click here for the list of events that generate journal entries on a cash basis.
Type: Shows one of the six journal entry types.
Reference: The transaction number from Client billing. In cash accounting, this will always be the Payment (with the exception of Invoice entries for gift cards).
Account name: The account owner's name (even if the transaction was made for another person in the account).
Account ID: The account ID is visible in the URL when viewing Client billing
(e.g., https://app.amilia.com/Clients/en/smartrec-demo/ClientBilling/3416593)Item type: The ledger account type (Revenue, Asset, or Liability).
Ledger: The ledger account where the transaction is posted.
Debit: The debit amount to the ledger account.
Credit: The credit amount to the ledger account.
Correction: Under unique circumstances, a developer may need to update an entry. If this is the case, the column will show 'yes'. In most cases, this column will show 'no', which means no correction has been made.
Journal entries summary
The journal entries summary provides debit and credit balances for each ledger account in the chart of accounts, and only those used for cash accounting purposes, for a selected period of time.
❗ Only custom revenue ledger accounts and system-generated ledger accounts used for cash accounting appear in this report.
There are 5 columns, and a row for each of your organization's ledger accounts.
Item type: Revenue, Asset, or Liability type ledger account.
Ledger code: The code linked to the ledger account.
Ledger: The name of the ledger account.
Debit: The total debit balance of the ledger account.
Credit: The total credit balance of the ledger account.
3. FAQ
1) Which permissions do I need to view cash accounting journal entries?
The same permissions are required to view both accrual or cash journal entries.
🔑 Finance and reporting |
Accounting reports: This permission is required to view journal entries reports in the Reports tab. |
🔑 Clients |
Client billing (optional): This permission allows gives admins visibility of client transactions in Client billing. |
2) Can I view journal entries for both cash and accrual?
Organizations have access to journal entry reports for both accounting methods. You can view each set of reports directly from the Reports tab.
3) Which 'events' generate journal entries for cash accounting?
Any event that involves a payment, credit, or payment reconciliation generates journal entries. There are six journal entry types that cover basic cash accounting:
Payment - any form of payment that reduces a balance
Reconciliation - when a form of payment is reconciled to an invoice item
ReconciliationDeletion - when the payment reconciliation is removed, or the invoice is cancelled
Refund - when a payment has been cancelled/refunded
Credit - when a credit is applied to an invoice item (custom item, give a rebate) or a credit memo is created in the client's billing.
Invoice - Only occurs when an invoice is created for a gift card.
In cash accounting, these journal entry types impact these types of ledger accounts:
Asset accounts | Liability accounts | Revenue accounts |
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4) What if an invoice is created but no payment is entered?
In cash accounting, invoices don't generate journal entries. So if an invoice is created, it won't appear in cash accounting journal entries. Revenue is only recognized when a payment is reconciled to the invoice item, which generates Reconciliation journal entries.
In accrual accounting, journal entries are created when the invoice is issued, even if no payment is received yet. Revenue is recognized when the event occurs, and the journal entry type is Invoice.
5) Can I switch from cash accounting to accrual accounting or vice versa?
How you track your ledger account balances is up to you. SmartRec automatically creates journal entries for both cash and accrual accounting, and the related reports are available to all organizations in the Reports tab.
You can even leverage both methods to get a full picture of your financial health!
6) How are installment payments recorded in cash accounting?
When installment payments are entered in SmartRec, Payment journal entries are created:
Debit to Asset-Cash ledger account (shows money received)
Credit to Liability-Account deposit ledger account (until reconciled)
Note: Installment payments don't generate journal entries until their planned date occurs. Revenue isn't recognized until the payment is reconciled to an invoice item.
7) What if a payment and reconciliation happen on different dates?
Payment journal entries are written on date of payment. Reconciliation journal entries will be written on the date of reconciliations (same as in accrual accounting).
8) What if an invoice is created, but it hasn't been paid yet?
In cash accounting, journal entries are only written upon payment collection and reconciliation. Until that happens, no cash journal entries will be written.
* Last updated in December 2025