Acca f3 Financial Accounting (int) Study Text
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64 4: Sources, records and books of prime entry Part C The use of double entry and accounting systems CASH BOOK (RECEIPTS)
20X7
$ 1 Sept
Balance b/d* 900
Cash sale 80 Accounts receivable: Hay 380 Accounts receivable: Been 720 Accounts receivable: Seed 140 Loan: Len Dinger 1,800 Cash sale 150 Sale of non-current asset 200
4,370
* 'b/d' = brought down (ie brought forward)
There is space on the right hand side of the cash book so that the receipts can be analysed under various headings – for example, 'cash from receivables', 'cash sales' and 'other receipts'.
The cash received in the day amounted to $3,470. Added to the $900 at the start of the day, this comes to $4,370. This is not the amount to be carried forward to the next day, because first we have to subtract all the payments made during 1 September. The payments part of the cash book for 1 September would look like this. CASH BOOK (PAYMENTS) Date Narrative Total 20X7
$ 1 Sept
Accounts payable: Kew 120
Accounts payable: Hare 310
Telephone 400
Gas bill 280
Petty cash 100
Machinery purchase 1,500
Balance c/d (balancing figure) 1,660
4,370 As you can see, this is very similar to the receipts part of the cash book. The only points to note are as follows. (a)
The analysis on the right would be under headings like 'payments to payables, 'payments into petty cash', 'wages' and 'other payments'. (b) Payments during 1 September totalled $2,710. We know that the total of receipts was $4,370. That means that there is a balance of $4,370 – $2,710 = $1,660 to be 'carried down' to the start of the next day. As you can see this 'balance carried down' is noted at the end of the payments column, so that the receipts and payments totals show the same figure of $4,370 at the end of 1 September. With analysis columns completed, the cash book given in the examples above might look as follows. CASH BOOK (RECEIPTS)
20X7
$ $ $ $ 1 Sept
Balance b/d 900
Cash sale 80 80 Accounts receivable: Hay 380
380 Accounts receivable: Been 720 720
Accounts receivable: Seed 140
140 Loan: Len Dinger 1,800 1,800
Cash sale 150
150 Sale of non-current asset 200 200
4,370 1,240
230 2,000
Points to note
Part C The use of double entry and accounting systems 4: Sources, records and books of prime entry 65 CASH BOOK (PAYMENTS) Accounts Petty Date Narrative Total payable cash Wages Other $ $ $ $ $ 20X7
1 Sept Account payable: Kew 120 120
Account payable: Hare 310
310
Telephone 400
400
Gas bill 280
280 Petty cash 100 100
Machinery purchase 1,500
1,500
Balance c/d 1,660
4,370 430
100 –
2,180 4.3 Bank statements Weekly or monthly, a business will receive a
that the amount shown as a balance in the cash book agrees with the amount on the bank statement, and that no cash has 'gone missing'. This agreement or 'reconciliation' of the cash book with a bank statement is the subject of a later chapter. 5 Petty cash Most businesses keep petty cash on the premises, which is topped up from the main bank account. Under the
imprest system, the petty cash is kept at an agreed sum, so that each topping up is equal to the amount paid out in the period. 5.1 What is petty cash? Most businesses keep a small amount of cash on the premises to make occasional small payments in cash, eg staff refreshments, postage stamps, to pay the office cleaner, taxi fares, etc. This is often called the cash float or petty cash account. The cash float can also be the resting place for occasional small receipts, eg cash paid by a visitor to make a phone call, etc. 5.2 Security As you will appreciate, keeping cash (even in small amounts) on the premises is a security risk. Therefore a petty cash system is usually subject to strict controls.
Payment is only made in respect of authorised claims.
All claims are supported by evidence. In addition, the business may use the imprest system (see Section 5.4 below). 5.2.1 Authorisation An employee must complete a
be attached to the voucher (see below: evidence). The completed voucher then needs to be signed by (say) the employee’s manager to
sign vouchers for small amounts (eg $5 or less) if these are supported by receipts. 5.2.2 Evidence All petty cash vouchers must have receipts for the expenditure attached, as evidence that the employee has really incurred that cost. Sometimes receipts may not be available (eg taxi fares) and the employer may then have systems in place to authorise claims without evidence.
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