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

2. Learning Objectives What you will learn: Why it’s important:
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.

3. The Cash Payments Journal
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

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. Recording the Cash Purchase of an Asset
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

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. Recording a Cash Purchase of Merchandise
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

9. Recording a Payment on Account (with a purchase discount)
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. 14
1003
Pro Runner Warehouse
2300 46
2254 24

10. Recording a Payment on Account (with a purchase discount)
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

11. Recording Other Cash Payments
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. 14 24
Transportation In
275
275
1004

12. Recording Other Cash Payments
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

13. Recording Payment of Payroll
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

14. 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

15. Recording Payment of Payroll31
Salaries Expense
4000
2974
1012
Emp. Fed. Inc. Tax Pay.
640 80
Emp. State Inc. Tax Pay.
Social Sec. Tax Pay.
248
Medicare Tax Pay. 58
MAKE SURE THAT DEBITS EQUAL CREDITS BEFORE CONTINUING

16. Recording Bank Service Charges
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

17. Recording Bank Service Charges

18. Recording Bankcard Fees
Most banks charge a fee for handling bankcard sales
Automatically deducted from the checking account
Appears on the bank statement as a deduction

19. Recording Bankcard Fees31 20 20
Misc. Expense

20. Posting to the Accounts Payable Subsidiary Ledger
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

21. Posting from the General Debit Column
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

22. Totaling, Proving, and Ruling the Cash Payments Journal
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
Credits
General $1026
Purch. Disc
Cash in Bank ,104
$18,270
Debits
General $9170
A/P
$18,270

23. Posting Column Totals to the General Ledger
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

24. Proving the Accounts Payable Subsidiary 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

25. Proving Cash
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

26. Preparing a cash proof 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

27. 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