4 POSTING RECEIPTS AND PAYMENTS FROM THE CASH RECORDS TO THE GENERAL LEDGER

4.1 POSTING TRANSACTIONS FROM THE CASH RECEIPTS RECORDS TO THE GENERAL LEDGER

Having listed (or obtained a bank listing) of receipts, which have been suitably analysed and referenced, it is now possible to post the transactions into the general ledger using the principles of double-entry bookkeeping.

The accounting entries in the general ledger are as follows:

Debit: Cash at bank $ with the total of receipts

Credit:

  • Sales Tax $ with the total of sales tax on cash sales
  • Receivables $ with the total receipts from credit customers
  • Cash sales $ total of the net amount of cash sales
  • Other $ of any other receipts e.g. bank interest received

Remember that, in a computerised system the update of the memorandum only receivables ledger accounts will happen simultaneously with the update of the general ledger. It is not a separate activity as it would be in a manual accounting system.

Example

The following entries have been made in the cash receipts record for 19 October.

DateReferenceTotal $Rec'bles $Cash sales $Sales tax $Other $
19.10.X6BL Lorries, a/c $2394,7004,700
MA Meters, a/c $3142,8202,820
Tanktop Ltd, a/c $2053,1003,100
Cash sale1,2001,000200
Totals11,82010,6201,000200

Task

Post these entries into the general ledger and the memorandum only receivables ledger accounts for individual credit customers.

Solution

The totals should be posted to the ledger accounts as follows.

General ledger
Bank
DateDetailsFolio$DateDetailsFolio$
19.10.X6Sundry receivablesCR1419.10.X6SalesCR1410,620
19.10.X6SalesCR141,000
19.10.X6Sales taxCR14200
Sales
DateDetailsFolio$DateDetailsFolio$
19.10.X6BankCR141,000
Sales tax
DateDetailsFolio$DateDetailsFolio$
19.10.X6BankCR14200
Receivables
DateDetailsFolio$DateDetailsFolio$
19.10.X6BankCR1410,620
Receivables ledger
BL Lorries
DateDetailsFolio$DateDetailsFolio$
19.10.X6BankCR144,700
MA Meters
DateDetailsFolio$DateDetailsFolio$
19.10.X6BankCR142,820
Tanktop Ltd
DateDetailsFolio$DateDetailsFolio$
19.10.X6BankCR143,100

4.2 POSTING TRANSACTIONS FROM THE CASH PAYMENTS RECORDS TO THE GENERAL LEDGER

Having listed (or obtained a bank listing) of payments, which have been suitably analysed and referenced, it is now possible to post the transactions into the general ledger using the principles of double-entry bookkeeping

The accounting entries in the general ledger are as follows:

Debit

  • Sales Tax $ with the total of sales tax on cash purchases
  • Payables $ with the total payments to credit suppliers
  • Cash sales $ total of the net amount of cash purchases
  • Other $ of any other payments e.g. bank interest paid

Credit:

  • Cash at bank $ with the total of payments

Each column in the cash payments book represents an account in the general ledger.

  • The total column is for the cash at bank account.
  • The sales tax column is for tax payable to the tax authorities.
  • The payables column is for the payables account.
  • Each of the other columns represents an expense account in the general ledger (or possibly an asset account).

It is likely that there will be more analysis columns for payments than for receipts.

There may also be memorandum only discount received information annotated within the cash payments records. This will be a discount received for early settlement ('prompt payment') of an amount before the due date. If this is the case, the accounting entries required in the general ledger will be:

Debit

Payables $

Credit

Discount received $

Remember that, in a computerised system the update of the memorandum only payables ledger accounts will happen simultaneously with the update of the general ledger, including any discount received for early settlement of amounts due. It is not a separate activity as it would be in a manual accounting system.

Example

The following entries have been made in the cash payments record for 19 October.

DateReferenceTotal $Payables $Cash purchases $Sales tax $Wages $Discount rec'd $
19.10.X6LS Shah, a/c P340(2,300)(2,300)
BA Chan, a/c P720(5,200)(5,200)30
OS Mosis, a/c P234(1,870)(1,870)
Cash purchases(3,000)(2,500)(500)
Wages(5,300)(5,300)
Totals(17,670)(9,370)(2,500)(500)(5,300)30

Task

Post these entries into the general ledger and the memorandum only payables ledger accounts for individual credit suppliers.

Solution

The totals should be posted to the ledger accounts as follows.

General ledger
Bank
DateDetailsFolio$DateDetailsFolio$
19.10.X6PayablesCP149,370
19.10.X6PurchasesCP142,500
19.10.X6Sales taxCP14500
19.10.X6WagesCP145,300
Payables
DateDetailsFolio$DateDetailsFolio$
19.10.X6BankCP149,370
19.10.X6Disc rec'dCP1430
Purchases
DateDetailsFolio$DateDetailsFolio$
19.10.X6BankCP142,500
Wages
DateDetailsFolio$DateDetailsFolio$
19.10.X6BankCP145,300
Discount received
DateDetailsFolio$DateDetailsFolio$
19.10.X6PayablesOsmosis CP1430
Payables ledger:
LS Shah
DateDetailsFolio$DateDetailsFolio$
19.10.X6BankCR142,300
BA Chan
DateDetailsFolio$DateDetailsFolio$
19.10.X6BankCR145,200
OS Mosis
DateDetailsFolio$DateDetailsFolio$
19.10.X8BankCR141,87019.10.X6Disc rec'dCR1430

ACTIVITY 6

1 A sole trader introduced $1,000 into the business by cheque. What is the double entry to record this transaction?

A Debit Petty cash / Credit Capital

B Debit Bank / Credit Capital

C Debit Capital / Credit Petty cash

D Debit Capital / Credit Bank

2 Jang purchased goods from a credit supplier. The cost of the goods was $250 on which the supplier added sales tax which was charged at 20%. Jang is registered to account for sales tax. How should this transaction be recorded in Jang's accounting records?

A Debit Purchases $250, Credit Payables $250

B Debit Purchases $250, Credit Payables $300 Debit Sales tax $50

C Debit Purchases $250, Credit Bank $250

D Debit Purchases $250, Credit Bank $300 Debit Sales tax $50

For suggested answers, see the 'Answers' section at the end of the book.

Remember that, whether a business uses computerised or manual accounting records, it needs to record and retain the same information. Users of computerised records therefore need to be familiar with how information is presented so that they understand the information they are using. For example, debits may be presented as positive (plus) items and credits may be presented as negative (minus) items in a computerised document that lists transactions, rather than presenting transactions in ledger account format.