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Ch. 17: The Cash Payments Journal Accounting II Ms. Alltucker.

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Presentation on theme: "Ch. 17: The Cash Payments Journal Accounting II Ms. Alltucker."— Presentation transcript:

1 Ch. 17: The Cash Payments Journal Accounting II Ms. Alltucker

2  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

3  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

4 Cash Payments Journal

5 Recording the Cash Purchase of an Asset Business Transaction On December 17, On Your Mark paid $1,500 to Keystone Insurance Company for the premium on a six-month policy, Check 1001. JOURNAL ENTRY

6  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

7 Recording a Cash Purchase of Merchandise Business Transaction On December 19, On Your Mark purchased merchandise from FastLane Athletics for $1,300, Check 1002. JOURNAL ENTRY

8  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

9  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) 24 1003 Pro Runner Warehouse 2300 462254 14

10  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)

11  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 24 1004 Transportation In 275 14

12  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

13  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

14  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

15 31 1012 Salaries Expense4000 Emp. Fed. Inc. Tax Pay. Emp. State Inc. Tax Pay. Social Sec. Tax Pay. Medicare Tax Pay. 640 80 248 58 2974 MAKE SURE THAT DEBITS EQUAL CREDITS BEFORE CONTINUING

16  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

17

18  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

19 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

21  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

22  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 $9170 A/P 9100 $18,270 Credits General $1026 Purch. Disc. 140 Cash in Bank 17,104 $18,270

23  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

24  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

25  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

26  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

27  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


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