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Chapter 7: Problem 5

The actual cash received from cash sales was \(\$ 6,973.60\), and the amount indicated by the cash register total was \(\$ 6,932\).15. Journalize the entry to record the cash receipts and cash sales.

Short Answer

Expert verified
Debit Cash for $6973.60, Credit Sales for $6932.15, Credit Cash Over and Short for $41.45.

Step by step solution

01

Calculate the Overage

First, identify if there's any discrepancy between the cash received and the cash register total. In this case, subtract the cash register amount (\\( 6,932.15) from the actual cash received (\\) 6,973.60), to find the overage.\[ \text{Overage} = \\( 6,973.60 - \\) 6,932.15 = \\( 41.45 \]This indicates that the actual cash received is \\) 41.45 more than what was recorded in the cash register.
02

Prepare the Journal Entry for Sales

To record the sales, credit the sales account with the amount indicated by the cash register since this is what the sales should have been. In this example, you need to credit the Sales account by the cash register total:\[ \text{Credit Sales} = \$ 6,932.15 \]
03

Record the Cash Received

Debit the Cash account for the actual cash received. This is the amount actually counted:\[ \text{Debit Cash} = \$ 6,973.60 \]
04

Record the Cash Over and Short

Identify the account for any overage or shortage funds found during cash counting. In this case, there is an overage to be recorded in the 'Cash Over and Short' account. Since it is an overage, credit 'Cash Over and Short'.\[ \text{Credit Cash Over and Short} = \$ 41.45 \]
05

Complete the Journal Entry

Now combine all the transactions into a complete journal entry:\[\begin{align*}\text{Debit:} & \& \text{Cash} \quad \\( 6,973.60 \\text{Credit:} & \& \text{Sales} \quad \\) 6,932.15 \& \text{Cash Over and Short} \quad \$ 41.45 \\end{align*}\]This journal entry reflects that actual cash received is greater than the amount recorded in the sales and captures the overage.

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Key Concepts

These are the key concepts you need to understand to accurately answer the question.

Cash Sales
Cash sales refer to transactions where the customer pays for goods or services at the time of purchase. These transactions are crucial since they immediately impact a company's cash balance.
When a cash sale occurs, a business must ensure that the sales are recorded accurately in its financial records. This involves crediting the Sales account for the amount shown by the cash register. This ensures the revenue is noted properly.
  • A cash sale impacts both the cash account and the sales revenue accounts.
  • This type of transaction increases the cash on hand instantly since payment is received right away.
Understanding cash sales is essential for maintaining accurate financial records, as they directly contribute to a company鈥檚 immediate cash flow.
Cash Over and Short
The 'Cash Over and Short' account is used in bookkeeping to record any discrepancies between the cash on hand and what should be in the drawer according to the register tapes.
This account helps monitor errors in cash handling processes, highlighting instances where there was either more or less cash than expected.
  • If there is more cash than the register shows, it's called an overage.
  • If there is less cash, it's considered a shortage.
  • Common reasons for overages or shortages include cashier mistakes, theft, or errors in recording transactions.
Recording these discrepancies helps businesses track and address any potential issues with cash management efficiently.
Accounting Discrepancy
An accounting discrepancy occurs when there is a mismatch between the recorded amounts and the actual figures. This concept is crucial in financial management, as it ensures that all entries are accurate, and funds are appropriately tracked.
In the context of cash sales, discrepancies can arise when the actual cash collected doesn't match what's recorded in the cash register. This requires careful review and adjustment through journal entries.
  • Discrepancies are identified by comparing physical cash with recorded amounts.
  • Resolving a discrepancy often involves adjusting records to reflect actual cash transactions accurately.
  • Regularly checking for discrepancies can help a business maintain accountability and transparency in its financial operations.
Ensuring that all discrepancies are addressed is essential for maintaining trustworthiness and clarity in financial reporting.

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Most popular questions from this chapter

The actual cash received from cash sales was \(\$ 17,572.40\), and the amount indicated by the cash register total was \(\$ 17,589\).65. Journalize the entry to record the cash receipts and cash sales.

Deana Crisman works at the drive-through window of Awesome Burgers. Occasionally, when a drive-through customer orders, Deana fills the order and pockets the customer's money. She does not ring up the order on the cash register. 1\. Identify the internal control weaknesses that exist at Awesome Burgers, and discuss what can be done to prevent this theft.

Satchell Company, a communications equipment manufacturer, recently fell victim to an embezzlement scheme masterminded by one of its employees. To understand the scheme, it is necessary to review Satchell's procedures for the purchase of services. The purchasing agent is responsible for ordering services (such as repairs to a photocopy machine or office cleaning) after receiving a service requisition from an authorized manager. However, since no tangible goods are delivered, a receiving report is not prepared. When the Accounting Department receives an invoice billing Satchell for a service call, the accounts payable clerk calls the manager who requested the service in order to verify that it was performed. The embezzlement scheme involves Drew Brogan, the manager of plant and facilities. Drew arranged for his uncle's company, Brogan Industrial Supply and Service, to be placed on Satchell's approved vendor list. Drew did not disclose the family relationship. On several occasions, Drew would submit a requisition for services to be provided by Brogan Industrial Supply and Service. However, the service requested was really not needed, and it was never performed. Brogan would bill Satchell for the service and then split the cash payment with Drew. 1\. Explain what changes should be made to Satchell's procedures for ordering and paying for services in order to prevent such occurrences in the future.

Accompanying a bank statement for Covershot Company is a credit memorandum for \(\$ 15,300\), representing the principal \((\$ 15,000)\) and interest \((\$ 300)\) on a note that had been collected by the bank. The depositor had been notified by the bank at the time of the collection, but had made no entries. Journalize the entry that should be made by the depositor to bring the accounting records up to date.

Prometheus Co. records all cash receipts on the basis of its cash register tapes. Prometheus Co. discovered during April 2006 that one of its sales clerks had stolen an undetermined amount of cash receipts when she took the daily deposits to the bank. The following data have been gathered for April: \(\begin{array}{lr}\text { Cash in bank according to the general ledger } & \$ 12,573.22 \\ \text { Cash according to the April } 30,2006 \text { bank statement } & 13,271.14 \\ \text { Outstanding checks as of April } 30,2006 & 1,750.20 \\ \text { Bank service charge for April } & 45.10 \\ \text { Note receivable, including interest collected by bank in April } & 5,200.00\end{array}\) No deposits were in transit on April 30, which fell on a Sunday. a. Determine the amount of cash receipts stolen by the sales clerk. b. What accounting controls would have prevented or detected this theft?
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