Bookkeeping Account Titles: Assets (1) Current Assets | From the Perspective of Small Business Accounting

I passed the Nissho Bookkeeping Level 1 exam, which I took on November 16, 2025!

Now that I have gained confidence in bookkeeping, I would like to explain bookkeeping here from now on.

When studying bookkeeping, it might be difficult to visualize if you have never actually done accounting or journal entries.

Therefore, from the perspective of the small business I manage, I will introduce how each account title is used and how journal entries are made, incorporating real-life examples.

(However, please note that methods and ways of thinking differ depending on the company, so please use this only as a reference.)

Current Assets

Cash and Petty Cash

In bookkeeping, it appears under the account title "Cash". On the balance sheet created as a financial statement, it is grouped together as "Cash and Deposits".

By the way, in actual accounting practice, the account title "Petty Cash" is also frequently used. Accounting software such as Freee or Money Forward often has the "Petty Cash" account title set up from the beginning.

Both represent cash, but the general differences are as follows:

• Cash: The main cash kept in the head office safe.

• Petty Cash: Cash that is divided into small amounts and allocated in advance to each department or accounting staff member.

If you are a company run by one person or a sole proprietor, having one account title called "Cash" should be sufficient.

However, as you hire accounting staff or increase the number of departments in different floors or offices, it becomes necessary to divide the cash into smaller amounts and entrust them to each person in charge. That is "Petty Cash".

Cash

Basically, this refers to the main, large amount of cash kept in the head office safe. Therefore, no sub-accounts are created, and it is used with this account title alone.
The ledger used is the "Cash Receipts and Disbursements Journal".

Since there are few occasions to frequently take money in and out of the safe during the day, there are not many journal entries under the "Cash" account title.
Since money is often taken in and out in units of 10,000 yen, it is unlikely to involve small amounts.

Because it is taken in and out of the safe, it is normally impossible for a cash shortage or surplus to occur in this "Cash" account. If a cash shortage or surplus were to occur here, it would be a matter of theft or embezzlement by someone.

Petty Cash

For small amounts of money managed by personnel in each department or by accounting staff, the "Petty Cash" account title is generally used.
Sub-accounts are created for each department or staff member to record journal entries. For example, it looks like this.

• Department A

• Department B

• Accounting Staff X

• Accounting Staff Y

Since it would be difficult to take money in and out of the safe every time for travel expenses for business trips in each department or for accounting staff to purchase stamps or office supplies, it is common to hand over a predetermined amount at the beginning of the month and settle it at a fixed time such as the end of the month.

[At the time of payment at the beginning of the month] Petty Cash

[At the time of payment at the end of the month]

As for the ledger, it is a "Petty Cash Book".
However, in recent companies that use cloud accounting, there is almost no need to keep paper ledgers. If you enter journal entries using double-entry bookkeeping, the petty cash book will be created automatically.

Since transactions are made in 1-yen increments, cash shortages or overages of a few yen to several thousand yen may occur in some cases. There will be minor mistakes, such as forgetting to get a receipt when purchasing drinks for a meeting at a convenience store.

It is a problem if such things happen too frequently, but if it is occasional and a small amount, it is quicker to just process it as cash shortage or overage rather than investigating the cause of the discrepancy.

By the way, ultimately, the account title "Petty Cash" does not appear on the balance sheet of the financial statements, and it becomes a single item as "Cash and Deposits".

Notes Receivable

Notes Receivable is an account title used when sales are made via promissory notes or when a note is received.

It is an account that frequently appears in bookkeeping certification exams. It is common to combine the receivable amount with the Accounts Receivable in the next item, multiply it by the actual bad debt rate, and calculate the allowance for doubtful accounts.

However, apart from traditional industries and large companies, I think there are few transactions involving notes in recently founded companies and small to medium-sized enterprises.

According to Tokyo Shoko Research, the ratio of sales via notes receivable in 2023 was 3.29%, and the balance of notes receivable recorded in financial statements was 13.9779 trillion yen.

[Reference] Tokyo Shoko Research "The sales ratio of "Notes Receivable, etc." is on a downward trend for small and medium-sized enterprises; commercial practices of note transactions remain deeply rooted in the wholesale and manufacturing industries"

Although the sales ratio is on a downward trend, it still remains, and the balance of notes receivable is moving sideways.

However, it seems that many companies are only doing it out of commercial custom and would like to stop transactions using notes if possible.

[Reference] Japanese Bankers Association, "Survey on the Actual Usage of Bills and Checks in Industry"

Note that by the end of fiscal year 2026 (end of March 2027), in principle, paper bills and checks are scheduled to be fully digitized and abolished. Consequently, in bookkeeping, they will be replaced by the following items, which appear from time to time.

• Notes Receivable → "Electronically Recorded Monetary Claims"

• Notes Payable → "Electronically Recorded Obligations"

My company has never engaged in bill transactions. Therefore, unfortunately, I have almost nothing to write about regarding these items.

Accounts Receivable

Accounts receivable is an account title used when sales are made on credit rather than for cash.

Aside from cash-based retail stores, most business-to-business sales and service transactions are conducted on credit. It is rare to receive cash on-site the day of delivery; more often, an invoice is sent later, and payment is expected by the end of the month or the end of the following month. Furthermore, having on-site employees handle sales cash is not ideal for management purposes (especially with large amounts), so credit sales are the standard.

Therefore, in practice, this is one of the account titles with the highest volume of journal entries.

In reality, sub-accounts are created and managed for each customer or business partner. In other words, if there are 100 customers, 100 sub-accounts will be created.

• Customer A

• Customer B

• Customer C

• ...

When you have just started a business and have few customers, you can manage with just one account title, but as the number of customers grows, problems will arise.

You check at regular intervals each month whether accounts receivable have been paid, and if there are unpaid balances, you confirm the amount and contact the relevant customer to request payment. If they are separated by sub-accounts, you can see the balance of accounts receivable for each customer at a glance just by recording the payment journal entry, which makes it easier.

Honestly, I think there are various ways to do this. Initially, I sometimes managed them using separate sheets like Excel, but as the number of things to manage increases, mistakes become more likely, and it becomes a hassle to perform tasks like entering data from Excel into the ledger again. Therefore, I feel it is easier to manage by separating sub-accounts for each customer or business partner.

In that case, it is easier to manage if the sub-account name is the name of the business partner. If the name is long, it may not be fully displayed in accounting software, so use a short abbreviation.

However, be careful not to have duplicates. It is important that the staff involved in accounting can work without making mistakes, rather than being fixated on the exact name. For example, if there are companies with the same name, it is easier to separate them by location or the year of the first transaction.
For example, if there are companies with the same name, it is easier to separate them by location or the year of the first transaction.

• Sato Trading (Shinjuku)

• Sato Trading (Yokohama)

• Suzuki Auto (2015)

• Suzuki Auto (2024)

Supplies

Stamps or revenue stamps that were purchased but not used cannot be treated as expenses, so they are transferred to supplies at the time of closing.

This is an item that often appears in bookkeeping problems.
You might see a problem statement like, 'Communication expenses include 100 yen in unused stamps, and taxes and public dues include 300 yen in unused revenue stamps,' and you would make a journal entry to transfer them to supplies.

To be precise, I think that is how it should be handled, but in reality, such processing may not happen very often.

The stamps or revenue stamps purchased by small businesses are only around a few thousand yen, even when bought in bulk. The task of actually counting how much is left at the end of the fiscal year and transferring it to supplies is more trouble than it is worth.

Or rather, when you have just started a business, you usually do not even have that knowledge. When I first started my business, I did not know that either, and I recorded everything as an expense at the time I purchased the stamps or revenue stamps.

Unused stamps or revenue stamps that were incorrectly recorded as expenses are indeed a violation under the Income Tax Act or the Corporation Tax Act, but if the purchase amount is only around a few thousand yen, it is unlikely that you will be pointed out for it during a tax audit.

Even if a tax official points out a mistake in recording expenses of only a few thousand yen, it will just be recorded as an expense the following year anyway, so the only thing they could collect is a few hundred yen in delinquent tax or additional tax. If the purchase amount of stamps were several million yen, it would be suspicious, but otherwise, they would not bother taking the time to come for an audit.

By the way, it is more likely to become a target for a tax audit if you do not affix revenue stamps to documents that require them. If they find dozens of contracts that should have had revenue stamps worth several thousand yen affixed to them, they can easily impose an additional tax of around 100,000 yen just from that. I was once subject to additional tax for that reason myself...