0 Glencoe Accounting Unit 4 Chapter 15 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Chapter 15, Section 3 Analyzing and Recording Cash Payments What Do You Think? Why do you think the accounting department is responsible for making cash payments for a business?

1 Glencoe Accounting Unit 4 Chapter 15 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Main Idea The accounting department is responsible for making the cash payments for the business. You Will Learn  the procedures for managing cash payments.  how to record the different types of cash payment transactions. Analyzing and Recording Cash Payments SECTION 15.3

2 Glencoe Accounting Unit 4 Chapter 15 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Key Terms  premium  FOB destination  FOB shipping point  bankcard fee Analyzing and Recording Cash Payments SECTION 15.3

3 Glencoe Accounting Unit 4 Chapter 15 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Controls over Cash A business can manage cash payments by following these procedures:  Require proper authorization of all cash payments.  Write checks for all payments.  Use prenumbered checks.  Retain and account for voided checks. Analyzing and Recording Cash Payments SECTION 15.3

4 Glencoe Accounting Unit 4 Chapter 15 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Cash Payment Transactions Businesses buy needed items on account or with cash. This section discusses how to record several types of cash payment transactions. Analyzing and Recording Cash Payments SECTION 15.3

5 Glencoe Accounting Unit 4 Chapter 15 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Recording Cash Purchase of Insurance Businesses purchase insurance to protect against losses from theft, fire, and flood. An insurance premium is paid at the beginning of the covered period and is recorded in the Prepaid Insurance asset account. Analyzing and Recording Cash Payments SECTION 15.3

6 Glencoe Accounting Unit 4 Chapter 15 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Recording Cash Purchases of Merchandise Usually businesses purchase merchandise on account. Sometimes a business buys merchandise for cash. Analyzing and Recording Cash Payments SECTION 15.3

7 Glencoe Accounting Unit 4 Chapter 15 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Recording Cash Purchases of Merchandise Analyzing and Recording Cash Payments SECTION 15.3

8 Glencoe Accounting Unit 4 Chapter 15 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Recording Cash Payments for Items Purchased on Account Each day, invoices due for payment are removed from the tickler file. Checks are prepared, signed, and mailed to creditors. Analyzing and Recording Cash Payments SECTION 15.3

9 Glencoe Accounting Unit 4 Chapter 15 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Other Cash Payments The shipping terms define if a buyer will be charged for the shipment of goods. Shipping terms are stated as:  FOB destination – the supplier pays the shipping cost  FOB shipping point – the buyer pays the shipping cost. Analyzing and Recording Cash Payments SECTION 15.3

10 Glencoe Accounting Unit 4 Chapter 15 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Recording Bankcard Fees Banks charge a bankcard fee for handling bankcard sales slips. Analyzing and Recording Cash Payments SECTION 15.3

11 Glencoe Accounting Unit 4 Chapter 15 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Key Terms Review  premium The amount paid for insurance.  FOB destination Shipping term specifying that the supplier pays the shipping cost to the buyer’s destination.  FOB shipping point Shipping term specifying that the buyer pays the shipping charge from the supplier’s shipping point. Analyzing and Recording Cash Payments SECTION 15.3

12 Glencoe Accounting Unit 4 Chapter 15 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Key Terms Review  bankcard fee A fee charged for handling bankcard sales slips; usually based on the total amounts recorded on the sales slips processed. Analyzing and Recording Cash Payments SECTION 15.3