chapter 4: cash book Flashcards
define books of first entry
books in which information from the source documents is recorded daily
list advantages of using books of first entry
- help summarise and group business’ transactions of similar characteristics together
- becomes easier to immediately obtain specific accounting records such as cash and bank balances, total credit sales and total credit purchases from the books of first entry
list the uses of books of first entry
- reduce the number of entries in the ledgers
- act as a giude for posting to the ledgers
- source of information for control
e
explain the use document numbers in books of first entry
serve as reference when there is a need to trace an entry back back to the original source document where the information was obtained
define VAT and distinguish between input VAT and output VAT
tax charged on the increase in value when goods or services are sold
input VAT- vat charged on the price when we purchase goods or services suppliers
output VAT- vat that we calculate and charge on the price when we sell our goods or services to the customers
list the types of bank accounts
savings account
current account
investment account
explain different payment methods
standing order- instruction given to the bank to make specified payments at given dates from the current bank account
direct debit- instruction given by the account holder to the bank to pay the requested amount to a named person or business
credit transfer- facility that allows you to transfer money electronically from one bank account to another.
explain the dual function of the cash book
serves as a book of first entry to record all cash and bank transactions
and a ledger for cash and bank accounts
define bank overdraft
a facility by the bank which allows our business to withdraw more money than in the account balance
explain source documents
documents from which transactions are recorded in the books of first entry- proof of transactions
