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Cash Receipts, Cash Payments, and Banking Procedures Section 1: Cash Receipts Chapter 9 Section Objectives 1.Record cash receipts in a cash receipts journal. 2.Account for cash short or over. 3.Post from the cash receipts journal to subsidiary and general ledgers. McGraw-Hill© 2007 The McGraw-Hill Companies, Inc. All rights reserved.

9-27 Objective 2 Account for cash short or over.

9-28 Occasionally errors occur when making change. When errors happen, the cash in the cash register is either more or less than the cash listed on the audit tape. Cash Short or Over

9-29 When cash in the register is more than the audit tape, cash is over. Cash Short or Over These are listed in the Cash Short or Over account. When the cash in the register is less than the audit tape, cash is short.

9-30 The Cash Short or Over account is an account used to record any discrepancies between the amount of currency and coins in the cash register and the amount shown on the audit tape. ANSWER: QUESTION: What is the Cash Short or Over account?

Cash Sales , Cash Short/Over , Consider the entry for January 15. CASH RECEIPTS JOURNAL PAGE 1

Cash Sales , Cash Short/Over , CASH RECEIPTS JOURNAL PAGE 1 $ $4, = $5, The cash is short. Shortages are recorded as debits.

Cash Sales , Cash Short/Over , CASH RECEIPTS JOURNAL PAGE 1 Debits are not the normal balance of the Other Accounts Credit column, so the debit entry is circled.

9-34 Cash Received on Account The Style Shop makes sales on account and bills customers once a month. It sends a statement of account to each customer.

9-35 A statement of account is a form sent to a firm’s customers showing transactions during the month and the balance owed. ANSWER: QUESTION: What is a statement of account?

Jan. 7Roy Anderson Look at the January 7 entry for Roy Anderson. The check amount is entered in the Accounts Receivable Credit and Cash Debit columns. CASH RECEIPTS JOURNAL PAGE 1

9-37 Cash Discounts on Sales The Style Shop does not offer cash discounts. However, many wholesale businesses offer cash discounts to customers who pay within a certain time period. These are sales discounts. Businesses with many sales discounts add a Sales Discounts Debit column to the cash receipts journal.

9-38 Additional Investment by the Owner On January 12 Mary Amos invested an additional $15,000 in The Style Shop.

InvestmentM. Amos, Capital15, The account name and amount are entered in the Other Accounts Credit section and the debit is entered in the Cash Debit column. CASH RECEIPTS JOURNAL PAGE 1

9-40 Receipt of a Cash Refund On January 17 The Style Shop received a $75 cash refund for supplies that were returned to the seller.

9-41 CASH RECEIPTS JOURNAL PAGE 1 The name and amount are entered in the Other Accounts Credit section. The debit is entered in the Cash Debit column. Cash RefundSupplies75.00

9-42 Collection of a Promissory Note and Interest Businesses use promissory notes to extend credit for some sales transactions.

9-43 A promissory note is a written promise to pay a specified amount of money on a certain date. ANSWER: QUESTION: What is a promissory note?

9-44 Sometimes promissory notes are used to replace an accounts receivable balance when the account is overdue.

9-45 On July 31 The Style Shop accepted a six-month promissory note from Stacee Fairley, who owed $800 on account. $ July 31, 20-- Six months AFTER DATE I PROMISE TO PAY TO THE ORDER OF The Style Shop Eight hundred and no/ DOLLARS -PAYABLE AT First Texas Bank VALUE RECEIVED with interest at 9% NO. 30 DUE January 31, 20-- Stacee Fairley

9-46 GENERAL JOURNAL Page 16 DATE DESCRIPTION POST. DEBIT CREDIT REF July 31 Notes Receivable Accounts Rec./Stacee Fairley Received a 6-month, 9% note from Stacee Fairley to replace open account The asset account, Notes Receivable, was debited. The Accounts Receivable account was credited. On July 31 The Style Shop recorded a general journal entry to increase notes receivable and to decrease accounts receivable for $800.

9-47 Interest rate= 9% per year Rate for six-month period= (9%) ÷ 2 = 4.5% Interest amount= $800 x 4.5% = $36 Total amount with interest= $800 + $36 = $836 Amount owed= $800

9-48 This sum covered the amount of the note ($800) and the interest owed for the six-month period ($36). On January 31 The Style Shop received a check for $836 from Stacee Fairley.

Collection ofNotes Receivable note/S. FairleyInterest Income The note and the interest are recorded in the Other Accounts Credit section. CASH RECEIPTS JOURNAL PAGE 1

9-50 Thank You for using College Accounting, 11th Edition Price Haddock Brock