Cash receipts and cash sales

Question 1

what is cash considered as in accounting terms?

Answer 1

anything that isn’t credit, coins, notes and bank cheques

Question 2

what must be done with the cash payments?

Answer 2

should be recorded immediately, most retail companies do this by cash till and cash register

Question 3

what does remittance mean and what is a remittance list?

Answer 3

remittance means any money being sent for your goods or services so a remittance list is a list of cheques and money received

Question 4

how are remittance lists recorded?

Answer 4

the date, amount and sender would be recorded, and then totalled at regular periods, ready for the bank

Question 5

what is a cash received list and which different way can they be recorded?

Answer 5

any cash sales recorded with the date, amount and some kind of detail, this can be done through a cash till or register

Question 6

what is a company does not have a till register to record cash sales what would be an alternative

Answer 6

a cash received list, this is similar to a remittance list but also combines any cash payments made to the company

Question 7

what is a cash book used for?

Answer 7

to record all the monetary transactions of a business

Question 8

why is it possible to have cheques in the cash column?

Answer 8

cash transactions remain cash until they are banked

Question 8

why should cheques be entered into the bank column despite being classed as a cash transaction?

Answer 8

cheques cannot be used until they have been banked so if it entered under cash the company may think they have more cash than they have.

Question 9

what are some key principles of they cash book?(dr+cr)(3)

Answer 9

debits are for money coming into the business
credits are for money coming out of the business
cash book doubles as a book of prime entry and part of the double entry so will need balancing in another account

Question 10

how do you record a cash sale into our books

Answer 10

debit cash book gross amount
credit sales (net) and VAT account (VAT)

Question 11

how would you record a cash sale made from a customer account

Answer 11

debit the full amount paid in the cash book (details: customer account)
credit the full amount paid in the receivables ledger control account and customer account (details: cash book)

Question 12

in the cash book what do entries on the debit side mean, explain what the cash and bank column mean?

Answer 12

means that the company is receiving money
if it is an entry in the cash column with the detail of cash sales this means that the company received money through cash sales
if the entry is under bank with the details of a credit customer this means a customer is settling their debit via cheque

Question 13

in the cash book what do entries on the credit side mean, explain what the cash and bank column mean?

Answer 13

the company is purchasing/ spending money
if it is an entry under cash this means that the company is buying using cash
if it is an entry under bank it means that the company is either settling their expenses like wages, rent etc or they are paying their suppliers

Question 14

what does contra (c) mean

Answer 14

this word means opposite/ against meaning that one account is set against the opposite entry for example the opposite of cash would be bank, so setting a contra on cash means that we are putting that amount of cash into the bank so we decrease the amount of cash but increase the amount in the bank.

Question 15

how to balance the cash book?(cash side)

Answer 15

add all the cash entries on the debit side and minus all cash entries on the credit side.
after that place that figure under the cash column on the credit side on the row labelled balance c/d usually with the last date of that period
under the balance c/d there is a row for the totals to which you put the cash amount for the debit side (which is higher) under both cash columns for debit and credit
after that you enter the fully calculated amount of the cash column (the balance c/d amount) (how much the company earned - how much the company spent) as the balance brought down on the debits side under cash as this is how much cash the company has got remaining from the previous period

Question 16

why will the cash column on the debits always be higher than the credits?

Answer 16

because with cash you cannot spend more than you have whereas with the bank you can as the business can be overdrawn

Question 17

how to balance the cash book?(bank side)

Answer 17

because we know that the debit side for cash will always be higher than credits because you cant spend more cash than you have however with the bank you can have an overdraft
add up entries for the bank column on both debit and credit sides and calculate which is higher
and following the same method as the cash columns, we need to take away the entries from the side with the lower amount, for example if credit entries had a higher amount in the bank column you should take away the debit entries from the credit amount
this amount should be entered into the the row labelled balance c/d under the bank column under the debit side as that side had the lower total amount
under that row is a row for totals, this should be the highest amount out of bother credit and debit in this case credit, and should be entered under the bank column on both debit and credit sides
under the totals row will be the balance b/d this amount will be the the total amount (for example debit entries taken away from credit total vice versa) (how much the company received - how much they spent) in this instance the credit total was higher so this amount will be put in the balance b/d on the credit side to indicate that the business is overdrawn
see chapter five page five

Question 18

why do businesses keep an analysed cash book?

Answer 18

the cash book has numerous entries as it is a book of prime entry so while updating to to the general ledger they may be more entries in that time, and sorting the sales from sales and payments from cr customers could lead to errors

Question 19

which entries are in the analysed cash book?

Answer 19

only the debit entries in the cashbook

Question 20

what could the analysed cash book also be called?

Answer 20

cash book receipts

Question 21

what would the sundry column contain?

Answer 21

-rental income for renting office space
-capital

Question 22

what does the bank column show in the analysed cash book?

Answer 22

the amounts paid into the bank + the opening balance

Question 23

how would you complete the double entry to the cash book?

Answer 23

credit the sales account, VAT account and receivables ledger control account with the figures in the analysed cash book

Question 24

which column from the analysed cash book will be entered into the sales account as part of the double entry?

Answer 24

cash sales as this is the net amount (exc VAT) make sure that you dont enter the cash amount

Question 25

what should you also update along with the receivables ledger control account?

Answer 25

the customer accounts

Question 26

what is the role of the discounts allowed daybook?

Answer 26

this is where credit notes are recorded when discounts are given, this will look very similar to a sales day book

Question 27

at the end of the period the totals of the discounts allowed daybook will be transferred to the general ledger accounts, which entries go where?

Answer 27

• debit the net total of all discounts at the end of the period in the discounts allowed account
• credit the gross total of the discounts allowed in the receivables ledger control account
• credit the VAT amount in the VAT account

Question 28

why is the VAT account debited in the general ledger for discounts allowed?

Answer 28

because vat on sales is a credit so the debit entry reduces the VAT you charge

Question 29

why is the receivables ledger control credited in the general ledger for discounts allowed?

Answer 29

because the original invoice will be debited so this reduces the amount owed by customers

Question 30

what should you also do along with entering the amounts in the general ledger for discounts allowed

Answer 30

update customer accounts

Question 31

what is an remittance advice?

Answer 31

a note that accompanies a cheque which highlights to a company which invoices are paid for and which credit notes are used by the customers

Question 32

list the two discrepancies that can happen with remittance advices.

Answer 32

• underpayments
  these can happen as genuine mistakes you should then contact the customer and either adjust the payment or add the outstanding amount to the next payment
• overpayments
  this can also happen as a genuine error and can be handled by either contacting the customer and either the customer agreeing to pay a lower amount on the next statement or issue a refund.

Question 33

whats another methods of payment a business may receive a remittance advice with?

Answer 33

BACS

Question 34

what are the different types of BACS payments

Answer 34

• standing order
• direct debit
• direct credit

Question 35

what is a standing order

Answer 35

an instruction a bank account holder gives to the bank to pay a set amount at regular intervals to another account, the instructions come from the person sending money

Question 36

what is a direct debit?

Answer 36

the same as a standing order but the person giving instructions is the person receiving money and the amount could vary

Question 37

what is a direct credit?

Answer 37

used to paying wages and salaries but also could be to pay suppliers

Question 38

what is the company commissioned by the government to make payments like BACS faster and cheaper and what is the service that runs alongside BACS

Answer 38

vocalink and they created FPS (faster payments service)

Question 39

what is the problem with automated payments?

Answer 39

companies don’t know if payments have even been made, so this gets in the way of PPD’s etc, it will only show on the bank statement at the end of the month

Question 40

what is a cheque?

Answer 40

a written instruction to the bank by the drawer to pay another person a specific amount

Question 41

what must you check on a cheque? (4)

Answer 41

• that it is signed
• the date is today date or earlier (within six months)
• words and figures agree
• payee name is correct

Question 42

what is a bank draft, and why is it more secure than a cheque?

Answer 42

the same as a cheque but the drawer (account holder) and drawee (bank) are the same, so the customer can request a bankers draft, usually for large purchases so the bank will take funds from the account before it issues the draft making it more secure than a cheque as it is from the bank itself and not the account holder.

Question 43

what is an advantage and disadvantage of cash payments

Answer 43

adv: there is no dispute over payment as the coins and notes are legal tender
disadv: they belong to whoever bears then so theft is a threat

Question 44

what are the security precautions you must take when taking cash payments?

Answer 44

• cash till should be closed unless in use
• if there is no till then cash should be kept in a cash box or safe
• cash should be banked as soon as
• contents of the till should be checked everyday against the till roll