8.1 Cash Book and Petty Cash Book 8.1.1 Cash Book Cash book is used to record all the business transactions that involving cash receive and cash payment. By recording the transactions in the cash book, it is easy to calculate the amount of money received and paid for a particular date. There are three types of cash book, namely single column cash book, double column cash book and petty cash book (Accounting Notes, n.d.). (a) Single Column Cash Book This kind of cash book has only one “Amount” column at the debit and credit side of cash book for recording cash receipts and cash payments as shown in Table 1 below. There are two methods to record transactions in the cash book which is “Traditional Approach” and “Equation Based Approach”. When using the traditional approach, the rule that must be followed is debit what comes in and credit what goes out. This simply means …show more content…
1 Balance b/d 350 17,000 50,400 8.2 Investigation of discrepancies between bank statement and cash book There are three main reasons that cause the discrepancy between cash book balance and bank statement balance. Those main reasons are: the transactions have been recorded in the cash book but not yet recorded in the bank statement, the transactions have been recorded in the bank statement but not yet recorded in the cash book, and bookkeeping errors may be made either by the bank, the business, or both (Mohd Nizal Haniff, Anuar Nawawi, Rodziah Abd Samad & Intan Salwani Mohamed, 2014). 8.2.1 Transactions recorded in cash book but not in bank statement There are two kind of transactions that have been recorded in the cash book (bank column) but may not have been recorded in the bank statement. (a) Transactions which involving money going out that have been credited in the cash book (bank column) but have not yet been debited in the bank statement. Example: Unpresented
Accounts receivable ending balance= Beginning balance +sales on Account - cash receipts -sales returns and allowances- charge of uncollectible account
Skimming. Because the wire transfers and cashier's checks were outside the accounts payable system (book keeping system), this is indicative of skimming. The wire transfers and checks transactions when posted to the bank accounts are historical and should be identified as part of the reconciliation process. The case states, "...many account reconciliations were either not prepared or were not maintained as part of Koss’s accounting records. To the extent that reconciliations were conducted, they were improperly performed by the same persons who initiated or recorded the transactions (i.e. Sachdeva or Mulvaney)"
During the audit 213 sales transactions were examined to test revenue controls; 82 deviations were found and are as follows:
...l. If a transaction is missing or the cash on hand is not adding up management should be notified.
Any discrepancies or inconsistencies between the documents and the recorded transactions are thoroughly investigated to determine their cause and
Despite this appealing advantage, the financial statements you prepare may not truly reflect your company’s performance for a given period since revenue and expenses related to the same transaction can be reported in two different periods. For example, if you pay most of the expenses related to a specific job at the end of one year but don’t receive payment from your client until the next, your income statements may indicate a big jump in profitability from one year to the next, which can lead to incorrect conclusions. Cash basis accounting tends to be simpler to understand than other accounting methods. If you choose to implement the cash method for your small business, it may not be necessary to seek the help of a professional accountant. The cash method most resembles a cash flow statement. It provides an accurate picture of how much cash your business actually has on-hand. Also, The cash method can be done with a simple single-entry system, so a complex accounting program is not always necessary. (Paychex,
As we learned in class by keeping accounting on the simple way of a General ledger the entries goes as follows, every entry is A Debit for 1 account following with a credit on the other for Example when you have a Rent Expenses of $ 15,000 meaning you taking out money from cash account to p...
Transactional Processing The accounting software packages developed and distributed by Sage and Microsoft, respectively, each use their own methods for recording accounting information. Sage 50. There are three different areas that must be discussed. These are the revenue, expenditure, and financing cycles. These areas are written about from the author's own knowledge from using the software, as learned from the book by Carol Yacht (2013).
In most cases, smaller companies use the cash basis method because it makes it easier to keep an accurate record of the amount of cash flow in a company. The accrual basis on the other hand helps with keeping revenues and expenses in the same period in which they occur, therefore creating a more accurate overall picture of the standing of the business/company. This method can only be applied to company whose revenue does not exceed $5 million on a yearly basis Smaller companies however make it easier to account for transactions since there aren’t any complex accounting transactions occurring, such as deferrals. With the timing of cash receipts and expenses not mandating to be done in the same period, profits can fluctuate between high and low and not accurately reflect. In contrast, larger companies use the accrual method. Larger companies are usually companies with sales exceeding $5 million on a yearly basis. Financial statements can only be audited if they are prepared using the accrual basis. The accrual basis allows for revenues and expenses to be matched in the same period so that profitability is accurate and organized. In the end there is no ability to generate cash unless a statement of cash flows is created. With the cash basis method being quicker and easier to use for businesses that don’t’ conduct their business on credit, it allows for the performance of the company
This pronouncement required the deferral method of accounting for income taxes. When the accounting net income exceeded taxable net income, balancing credit should be recognized, when the taxable net income exceeded the accounting, a balancing debit should be recognized. This was considered a deferred credit and a deferred debit. Deferred charges and credits were default classification and were placed on the Balance Sheet in what was called "no man's land," or some undefined region, between liabilities and owner's equity for deferred credits and between assets and liabilities for deferred charges. Under APB Opinion #11 it was believed that the balancing credits and debits would eventually reverse and cancel out and therefore it was to be treated as a temporary measure.
Accounting is the language of business. Accounting records and processes financial information into an accessible format that can be understood by anybody in the business world. It is defined in business that accounting is “the recording, measurement, and interpretation of financial information.” (Ferrell, Hirt, Ferrell, 2016, p. 286). Companies uses accounting tools to evaluate organizational operations. Accountants summarize the information from a firm’s business transactions in various financial statements for a variety of stockholders. There is a lot of business failures that happen because of information that is “hidden” in the financial statements. Cash flow is the greatest concern of management. For businesses to succeed, they need
The terms debit and credit are used in recording business transactions which will indicate the increases or decreases of a specific account, be it an asset, liability, owner’s equity or capital, revenue, expenses and the owner’s drawings. Being on the left side of the equation, all assets will increase on the left side or debit side and its corresponding “partner” account like for example, the investment of an owner, will take the right side or credit side.
All the goods and services used in the company need to be paid timely. These include payment to be made to vendors for the goods, payment of wages and salaries, payment to be made for electricity, water, fuel and other direct expenses and for the payment of indirect expenses including the administrative and financial expenses. A firm need to maintain cash balance to make the payment of these expenses timely so that the business can operate without any hurdles. To quote Bollen, “Cash is an oil to lubricate the ever-turning wheels of business: without it, he process grinds to stop.”
Every transaction gets entered twice in financial records. If one day you sold three gold coins ' worth of pepper, you would write that the amount of cash you had went up by three gold coins. You would also write in that the amount of pepper you had went down by three gold coins ' worth. Before double-entry, people just kept diaries and counted their money at the end of the day. This innovation allowed merchants to see every aspect of their business in neat little rows. (Kestenbaum,
Contra assets; normally assets are debit balance but contra asset is asset with credit balance.