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cash transactions expanded - Coggle Diagram
cash transactions expanded
What are credit card sales?
Different to cash sakes because there is no direct exchange of money/ cash when the sale is made
Problem: there is inventory leaving the shop but no money entering the business account
How do we reconcile that problem then?
CRJ because there was a "receival" of money at the bank
Debit bank, Debit COS and Credit trading inventory because the is less stock
What are bank charges
Fees that the business pays to the bank for their services.
Bank charges are automatically deducted at month end by the bank
We must account for bank charges because even though they are not a "daily expense" they still influence the bank balance
We treat bank charges as if money is leaving the business (CPJ)
How to account for bank charges?
Debit an expense (Bank charges) & Credit an Asset (Bank)
Carriage on trading stock a.k.a
delivery cost
Delivery costs occur when the business pays for transportation of goods (from supplier to business property)
But: do we account for delivery costs separately?
Delivery costs will form part of the trading stock that was purchased by the business
Delivery costs actually contribute to the eventual cost price of the trading stock that the business purchases
Delivery costs are added to TS
Discount to debtors
Discount to debtors occurs when the business offers a discount for early payment/settlement of account by debtors
The business will give a discount to encourage debtors to settle their account before the 90 day period
Problem: If debtor buys goods worth R500 on credit & then they are given a discount for early settlement the amount they eventually pay will be less than the original price of goods purchased on credit...HOW DO WE FIX THIS???
This discount is accounted for by creating an account called DISCOUNT ALLOWED where the difference between the actual price of goods bought and the price paid will be accounted for
Credit debtors control: decrease the money owed by the debtor
Debit bank with amount received because the debtor has finally settled their debt
But also debit the new DISCOUNT ALLOWED account to show why the amount that the debtor paid is less = there was a discount