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Chapter 8: Problem 12

The actual cash received from cash sales was \(\$ 21,099.75\), and the amount indicated by the cash register total was \(\$ 21,114.26\). Journalize the entry to record the cash receipts and cash sales.

Short Answer

Expert verified
Debit Cash $21,099.75, Debit Cash Short and Over $14.51, Credit Sales $21,114.26.

Step by step solution

01

Understand the Problem

You are asked to journalize an entry that reflects a discrepancy between the actual cash received and the amount indicated by the cash register. The cash register shows $21,114.26 but only $21,099.75 was actually received.
02

Identify the Discrepancy

Calculate the difference between the cash register total and the actual cash received. The discrepancy is calculated as follows:\[ \text{Discrepancy} = \text{Cash Register Total} - \text{Actual Cash Received}= 21,114.26 - 21,099.75 = 14.51 \]
03

Determine the Accounts Affected

In this situation, the accounts that are affected are 'Cash' and 'Cash Short and Over'. The 'Cash' account should reflect the actual cash received, and the 'Cash Short and Over' account will track the discrepancy.
04

Journalize the Entry

Now, record the journal entry. The entry will consist of: - Debit 'Cash' for the actual amount received: $21,099.75. - Debit 'Cash Short and Over' for the discrepancy amount that represents the presumed cash shortage: $14.51. - Credit 'Sales' for the total amount from the cash register: $21,114.26. The journal entry is: ``` Debit Cash $21,099.75 Debit Cash Short and Over $ 14.51 Credit Sales $21,114.26 ```
05

Review and Finalize

Ensure the debit and credit totals are equal to keep the accounting equation balanced. Double-check all amounts and the logic behind using 'Cash Short and Over'. The debits ($21,099.75 + $14.51) sum to $21,114.26, matching the credit amount.

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Key Concepts

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

Understanding Cash Sales
In any business, 'cash sales' refer to the transactions where customers pay for goods or services at the point of sale using cash. This is an important aspect as it is one of the most immediate forms of revenue for a business.
Cash sales are typically recorded through a cash register or point-of-sale system, which tracks the total amount of sales made during a given period. Knowing how to accurately manage and record cash sales ensures that businesses maintain accurate financial records and helps prevent any potential discrepancies.
  • Cash sales can have different means of payment: physical cash, debit card (amount taken immediately), and even gift cards.
  • Accurate tracking of cash sales aids in assessing business performance and aids in maintaining cash flow.
Identifying Cash Discrepancy
A 'cash discrepancy' occurs when the cash recorded by the cash register doesn't match the actual physical cash at hand. Understanding why these discrepancies occur is crucial for accurate financial management.
Common causes can include human error in recording transactions, incorrect change given, or possible theft.
It鈥檚 important to address discrepancies swiftly, as they can indicate errors or irregularities in the sales process.
  • Regular cash reconciliations help in quickly identifying discrepancies.
  • Staff training can minimize human error.
  • Using automated cash handling systems reduces discrepancies considerably.
Accounts Affected in Cash Sales
When recording cash sales, particular accounts in the financial ledger are affected. The primary ones include 'Cash', 'Sales', and sometimes 'Cash Short and Over'.
  • Cash Account: It reflects the actual cash received, which is pivotal for accurate reporting.
  • Sales Account: This account captures the total amount recorded as sales during the period.
  • Cash Short and Over: Used to record discrepancies between expected and actual cash, indicating overages or shortages.
Understanding which accounts are affected helps ensure that all transactions are appropriately recorded and discrepancies are accounted for.
Journalizing Entries for Cash Transactions
'Journalizing entries' refers to accurately documenting business transactions in the accounting journal. This is the first step in the accounting cycle and involves recording entries to reflect cash sales and discrepancies.
When a discrepancy arises:
  • Debit the 'Cash' account for the actual amount received.
  • Debit 'Cash Short and Over' for the discrepancy amount to account for the shortage.
  • Credit the 'Sales' account for the total amount indicated by the cash register.
By ensuring that debits equal credits, the accounting equation remains balanced. Proper journalizing can prevent misreporting and ensure financial clarity.

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Most popular questions from this chapter

Using the http://www.google.com Advanced Search feature, enter "Sarbanes- Oxley" and click on Google Search. Click on "Summary of Sarbanes-Oxley Act of \(2002^{\prime \prime}\) that appears as part of the aipca.org Web site. Scan the summary of the act and read Section 404 . What does Section 404 require of management's internal control report?

Paul鈥檚 Rama Co. is a medium-size merchandising company. An investigation revealed that in spite of a sufficient bank balance, a significant amount of available cash discounts had been lost because of failure to make timely payments. In addition, it was discovered that the invoices for several purchases had been paid twice. Outline procedures for the payment of vendors鈥� invoices, so that the possibilities of losing available cash discounts and of paying an invoice a second time will be minimized.

Accompanying a bank statement for Bionics Company is a credit memorandum for \(17,750, representing the principal (\)15,000) and interest ($2,750) 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.

Argonaut Co. records all cash receipts on the basis of its cash register tapes. Argonaut Co. discovered during November 2008 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 November: Cash in bank according to the general ledger $12,510.45 Cash according to the November 30, 2008 bank statement 22,060.65 Outstanding checks as of November 30, 2008 6,381.42 Bank service charge for November 35.00 Note receivable, including interest collected by bank in November 7,140.00 No deposits were in transit on November 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?

Identify each of the following reconciling items as: (a) an addition to the cash balance according to the bank statement, (b) a deduction from the cash balance according to the bank statement, (c) an addition to the cash balance according to the company鈥檚 records, or (d) a deduction from the cash balance according to the company鈥檚 records. (None of the transactions reported by bank debit and credit memoranda have been recorded by the company.) 1\. Bank service charges, \(48. 2\. Outstanding checks, \)8,125.50. 3\. Deposit in transit, \(12,200. 4\. Note collected by bank, \)8,750. 5\. Check drawn by company for \(150 but incorrectly recorded as \)510. 6\. Check for \(200 incorrectly charged by bank as \)2,000. 7\. Check of a customer returned by bank to company because of insufficient funds, $1,200.
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