Post on 16-Dec-2015
Ch. 17: The Cash Payments Journal
Accounting IIMs. Alltucker
What you will learn: The purpose of the cash payments journal How to record transactions in the cash payments journal How to post from the cash payments journal How to prepare a schedule of accounts payable How to prove cash
Why it’s important: Cash is a major asset of a business, therefore, it is
essential that a business keep accurate records of the both the inflow and the outflow of cash.
Learning Objectives
Used to record all transactions in which cash is paid out or decreased Payments to creditors Cash purchases of merchandise or other assets Payments for various expenses Payments for wages and salaries Cash decrease for bank service charges
Source document: check stubs and bank statements
The Cash Payments Journal
Cash Payments Journal
Recording the Cash Purchase of an Asset
Business Transaction
On December 17, OnYour Mark paid $1,500 toKeystone InsuranceCompany for thepremium on a six-month policy, Check 1001.
JOURNAL ENTRY
Enter the date Enter the check number Enter the name of the account debited If there isn’t a special column for the
account, use the general debit or credit columns
Enter amount of the transaction in the cash in bank credit column
Recording the Cash Purchase of an Asset
Recording a Cash Purchase of Merchandise
Business Transaction
On December 19, OnYour Mark purchasedmerchandise fromFastLane Athletics for $1,300, Check 1002.
JOURNAL ENTRY
Enter the date Enter the check number Enter the name of the account If no special column, enter the amount in the
general debit and credit columns Enter the amount of the check in the cash in
bank credit column
Recording a Cash Purchase of Merchandise
On December 24 On Your Mark paid $2254 to Pro Runner Warehouse for merchandise purchased on account, $2300 less a discount of $46, Check 1003.
Recording a Payment on Account (with a purchase discount)
241003Pro Runner Warehouse 2300 46 2254
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Enter the date Enter the check number Enter the creditors name Enter the amount of the ORIGINAL purchase in
the A/P debit column Enter the amount of the purchases discount in
the purchases discount credit column Enter the amount of the check in cash in bank
credit column
Recording a Payment on Account (with a purchase discount)
On December 24 On Your Mark issued Check 1004 for $275 to Dara Delivery Service for shipping charges on merchandise purchased from Sports Link Footwear.
Recording Other Cash Payments
241004Transportation In 275 275
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Enter the date Enter the check number Enter the name of the account debited There is no special column for Transportation
In, enter the amount of the expense in the general debit column
Enter the amount of the check in cash in bank credit column
Recording Other Cash Payments
Information to record payroll transactions in journals is taken from the payroll register
Steps: Enter the date Enter the check number Enter the name of the account debited Enter the amount of payroll (GROSS PAY) in the
General debit column Enter the net pay in the cash in bank credit column On the next four lines enter the names of the
accounts credited and the amount of the liability in the general credit column
Refer to page 462 as a reference
Recording Payment of Payroll
On Dec 31 on Your Mark wrote Check 1012 for $2974 to pay the payroll of $4000 (gross) for the pay period ending Dec. 31. The following amounts were withheld: Employee Federal Income Tax $640 Employee State Income tax $80 Social Security $248 Medicare tax $58
Recording Payment of Payroll
Recording Payment of Payroll
311012Salaries Expense 4000Emp. Fed. Inc. Tax Pay. Emp. State Inc. Tax Pay.Social Sec. Tax Pay. Medicare Tax Pay.
64080
24858
2974
MAKE SURE THAT DEBITS EQUAL CREDITS BEFORE CONTINUING
Bank service charges are automatically deducted from the checking account
No check is written BUT charges result in a decrease to cash—
the transactions are recorded in cash payments
Recording Bank Service Charges
Recording Bank Service Charges
Most banks charge a fee for handling bankcard sales
Automatically deducted from the checking account
Appears on the bank statement as a deduction
Recording Bankcard Fees
Recording Bankcard Fees
31 Misc. Expense 20 20
Daily postings are made Steps:
Enter the date of transaction Enter journal letter and page number: CP5 In debit column enter the amount recorded from
journal Compute new balance Return to the cash payments journal and enter a
check mark in the post ref column See page 464-465
Posting to the Accounts Payable Subsidiary Ledger
Enter the date of the transaction in the date column
Enter the journal letter and page number: CP5 In the debit column enter the amount from the
general debit column of CP journal Compute new balance Return to cash payment journal and enter the
account number is post reference Look on page 466 for an example
Posting from the General Debit Column
Totaled in the same manner as the rest of the special journals
Before you prove—check the equality of debits and credits
Once debits = credits, the journal can be ruled Look on page 467 for an example
Totaling, Proving, and Ruling the Cash Payments Journal
Debits
General $9170A/P 9100
$18,270
Credits
General $1026Purch. Disc. 140Cash in Bank 17,104
$18,270
At the end of every month, the totals of each special amount column is posted to the general ledger accounts Accounts payable Purchases discounts Cash in bank
Account numbers for these accounts are written in parentheses below the double rule
A check mark is entered below the double rule in the general debit and credit columns
Look on page 468 for an example
Posting Column Totals to the General Ledger
Prepare a schedule of accounts payable Lists all creditors in the accounts payable
ledger, the balance in each account, and the total amount owed to all creditors
Proven when the total of the schedule of accounts payable = with the balance of the accounts payable controlling account
Look on page 468 in your book
Proving the Accounts Payable Subsidiary Ledger
Process of verifying that cash recorded in the accounting records agrees with the amount recorded in the checkbook
Ideally, business prove cash every day When businesses use special journals the cash in
bank account is updated at the end of every month
May be prepared on plain paper, on accounting stationery, on a special cash proof form, or on a computer
Proving Cash
Steps Record the beginning balance of cash in bank—general
ledger account Enter the total cash received during the month
Total of cash in bank debit column from cash receipts journal Add the first and second lines Subtract the cash payments for the month—total of cash
in bank credit from CP journal Compare this figure to the balance shown on the last
check stub in the checkbook LOOK ON PAGE 471 FOR AN EXAMPLE
Preparing a cash proof
If the balances are not equal: Error should be located and corrected Can occur if a bank service charge or a
bankcard fee was not recorded in either the checkbook or journal
Verify that all disbursements and deposits were recorded
Preparing a cash proof