Cash books & Reconciliations Flashcards
What accounts does the cash book contain?
Both the cash a/c and the bank a/c
What is the purpose of the bank a/c?
To record all transactions that occur in the business bank a/c
What is the purpose of the cash a/c?
To record all cash transactions within the business but NOT petty cash.
Why do we not record the VAT of our trade receivables in the analysed cash book?
The VAT was already recorded when the sale was accounted for in the sales day book.
If recorded in the analysed cash book as well, we would be paying HMRC twice for the sales VAT.
Why do we not record the VAT of our trade payables in the analysed cash book?
The VAT was already recorded when the purchase was accounted for in the purchases day book.
If recorded in the analysed cash book as well, we would be claiming HMRC twice for the purchases VAT.
The cash book is both…
and what does that mean?
A book of prime entry and part of the general ledger.
This means only the analysed side of the cash book is posted to the general ledger.
What would double entry for cash receipts look like on a t account?
Debit
Bank account
Credit
Sales ledger control account (receipts from receivables)
Sales (Cash sales)
Other income (Rent)
What would double entry for discounts allowed look like on a t account?
Debit
Discounts allowed
VAT
Credit
Sales ledger control account
How would the cash receipts book and discounts allowed book be posted to the sales ledger (subsidiary)?
After totals are posted into the general ledger, each cash receipt is credited to the individual receivable account (Reduction of amount owing)
And
Each discount allowed is credited to the individual receivable account (reduction of amount owing)
What would double entry for cash payments look like on a t account?
Debit
Purchases for cash
Purchase ledger control account
Other expenses
Credit
Bank account
What would double entry for discounts received look like on a t account?
Debit
Purchase ledger control account
Credit
Discounts received
VAT
How would the cash payments book and discounts received book be posted to the purchases ledger (subsidiary)?
After totals are posted into the general ledger, each cash payment is debited to the individual payable account (Reduction of amount owing)
And
Each discount received is debited to the individual payable account (reduction of amount owing)
What is the imprest system and how does it work?
A set amount of petty cash is determined for a period (imprest amount)
Cash is only paid out when vouchers are put into the petty cash book.
At the end of the week the petty cash box is topped back up to the imprest amount from the bank account.
Petty cash vouchers must…
Give details of the expenditure incurred by employee
Be supported by receipt or other evidence of expense
Must include VAT where reclaimable
Must be authorized before payment can be made.
