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Cash Journals

UNIT 3 CH 6

QuestionAnswer
CPJ: an accounting record summarising all cash paid during a month/RP
Details CPJ include: date, details, chq.no, bank (amount of payment), classification columns, sundries, GST
Benefit of recording transactions in special journals: summarise similar transactions so that totals can be posted to the GL, reduce the no. of ledger entries required, improving the efficiency of the recording system.
Explain what each payment has in common in terms of its effect on the GL: Each cash payment has the same effect on the ledger account for Bank; that is, a decrease (recorded on the credit side).
State why the CPJ only identifies the account to be debited in the Details column. Because every cash payment requires a credit to the Bank ledger account, the only part of the double entry that must be specified for each payment is the other account to be debited.
source doc used to verify cash payments: cheque butts
Explain why the name of each creditor is identified in the Details column. The name is required so that the individual transactions can be posted to the individual creditors’ accounts in the creditors ledger.
Explain how the headings for the classification columns in the Cash Payments Journal are determined. The headings are determined according to the frequency of the cash payment and will vary from one business to another.
Explain the double-checking mechanism in the Cash Payments Journal. Each column in the Cash Payments Journal is totalled. The total of the Bank column should equal the sum of the totals of the other columns.
State the effect of GST paid on cash paid for purchases: increases amount paid out of the bank
State the effect of GST of the A/E purchases GST does not affect value
Explain how the Cash Payments Journal is posted to the General Ledger. Each column in the journal is totalled and is posted at the end of the month. The entries in the Sundries column are posted to the individual accounts at the end of the month.
Explain why the cross-reference used when the Cash Payments Journal is posted to the Bank account is not the name of a ledger account. there is no single account linked to the total paid out of the Bank account; Payments for many different purposes. Cross-reference must be ‘cash payments’ to indicate that there are a number of other accounts linked to this total payments figure.
Effect of GST paid on Bank: increases total cash payments, decreasing Bank
Effect of GST paid on GST clearing: Debits GST Clearing, decr L, incr A, treated as though the business the GST was paid directly to the ATO.
Identify two differences in the way the Cash Payments Journal is posted to the Creditors Ledger (compared to the way it is posted to the General Ledger). CPJl is posted to the GL at the end of the month, using the column totals. Individual transactions are posted to the Creditors Ledger accounts on the day they occur.
Explain the cross-reference used in the individual creditors accounts. The cross-reference is the same used when posting the Cash Payments Journal in the General Ledger account of Creditors Control (Bank).
Explain what each cash receipt has in common in terms of its effect on the General Ledger. Each cash receipt has the same effect on the ledger account for Bank; that is, an increase (recorded on the debit side).
State why the Cash Receipts Journal only identifies the account to be credited in the Details column. Because every cash receipt requires a debit to the Bank ledger account, the only part of the double entry that must be specified for each receipt is the account to be credited.
CRJ: an accounting record that summarises all cash received during a month/RP
GST settlement: a cash payment made to the ATO to settle the L that occurs when GST on sales is greater than GST on purchases
GST refund: a cash receipt from the ATO to refund the excess that occurs when GST on sales is less than GST on purchases
settlement discount: a reduction in the amount repayable by a credit customer in return for early repayment
Discount Revenue: a R (in the from of decr. in creditors) earned when creditors are paid early
note about cash paid to creditors: cash paid to creditors = total of creditors column less discount R
Discount Expense: an E, in the form decd in debtors, incurred when cash is received early from debtors.
Explain how the headings for the classification columns in the Cash Receipts Journal are determined. The headings are determined according to the frequency of the cash receipt and will vary from one business to another.
Explain why the name of each debtor is identified in the Details column. The name is required so that the individual transactions can be posted to the individual debtors’ accounts in the Debtors Ledger.
Explain why it is necessary to use a Cost of Sales column in the Cash Receipts Journal. Each sale will involve two double entries: one at the sp and one at the cost price. As each sale decreases stock and creates an expense (COS) it is also necessary to show the cost price of each sale in the CRJ
Explain the double-checking mechanism in the Cash Receipts Journal. The total of the Bank column should equal the sum of the totals of the other (classification and Sundries) columns, except Cost of Sales because it does not involve an inflow of cash.
Explain how the Cash Receipts Journal is posted to the General Ledger. Each column in the journal is totalled and is posted at the end of the month. The entries in the Sundries column are posted to the individual accounts at the end of the month.
Explain why the cross-reference used when the Cash Receipts Journal is posted to the Bank account is not the name of a ledger account. There is no single account linked to the total received in the Bank account; $ received for different purposes. Thus cross-reference = ‘cash receipts’ to indicate that there are a no. of other accounts linked to this total receipts figure.
Identify two differences in the way the Cash Receipts Journal is posted to the Debtors Ledger (compared to the way it is posted to the General Ledger). The Cash Receipts Journal is posted to the General Ledger at the end of the month, using the column totals. Individual transactions are posted to the Debtors Ledger on the day they occur.
Explain how the cross-reference used in the individual debtor accounts is determined. The cross-reference is the same used when posting the Cash Receipts Journal to the General Ledger account of Debtors Control (Bank).
Explain why a GST refund is not recorded in the GST column in the Cash Receipts Journal. The GST column in the Cash Receipts Journal is only for GST received from customers for cash sales, whereas the GST refund is received from the ATO itself.
Explain what is meant by the notation ‘5/7, n/30’. 5/7 – 5% discount if the invoice is paid within 7 days n/30 – the net amount must be paid within 30 days
List the benefits of offering a settlement discount. 1: Cash is received faster from debtors._2:_ The possibility of bad debts is reduced._3:_ Greater sales may be encouraged.
List the costs of offering a settlement discount. Less cash is received from debtors.__ Net profit is reduced.
Explain why discount revenue is classified as revenue. It is classified as revenue as it is a reduction in an outflow of economic benefits (less cash paid to creditors), in the form of a reduction in liabilities (creditors) that increases owner’s equity.
Where a discount is received on a payment to a creditor, state the amount that should be recorded in the following columns of the Cash Payments Journal: Bank – the actual amount of cash paid to the creditor (amount owing less discount) Creditors Control – the amount of cash paid to the creditor plus the amount of discount (the total reduction in creditors).
Explain why discount expense is classified as an expense. Discount expense is a reduction in an inflow of economic benefits (less cash is received), in the form of a reduction in assets (debtors) that decreases owner’s equity.
Where a discount is given on a receipt from a debtor, state the amount that should be recorded in the following columns of the Cash Receipts Journal: Bank – the actual amount of cash received from the debtor (amount owed less discount) Debtors Control – the amount of cash received from the debtor plus the amount of discount (the total reduction in debtors).
State one reason why the amount posted to the Debtors Control account from the Cash Receipts Journal is not the same as the cash received from debtors. The amount posted to the Debtors Control account includes the discount expense (which is not included in the cash received from debtors).
Explain why two accounts are cross-referenced in the Debtors Control account when a discount expense is incurred on a receipt from a debtor. This is because the amount credited to the Debtors Control account consists of some cash and some discount expense.
Created by: 96.0