Details of all payments made should be recorded in the accounting records. The first step is to make a produce a cash payments record - this may even be transaction, summary obtained from the bank of transactions which have been processed through the bank account
The records of receipts and payments are often maintained separately. The purpose of a cash payments records is to record:
Each payment to a credit supplier must be recorded individually. Payments relating to cash purchases can be recorded as a total. The cash payments records should be updated regularty, perhaps every day in large businesses. There are likely to be more analysis columns for payments and the example below gives an impression of what it may look like.
| Date | Cheque number | Payee/supplier account number | Total $ | Payables $ | Sales tax $ | Insurance $ | Wages and salaries $ | Petty cash $ | Other $ | Discount received $ |
|---|---|---|---|---|---|---|---|---|---|---|
| Totals | G/L ref | G/L ref | G/L ref | G/L ref | G/L ref |
Date.
This is the date of the payment.
Cheque number.
When payment is by cheque, the cheque number should be shown. Cheques should be used and recorded in sequential number order. If they are not, there may be a security problem with a missing cheque. If payment is by another method, such as BACS, the payment method should be shown here.
Payee, supplier account number.
This column is for entering the identity of the payee. If the payment is to a trade payable, the payable's account number in the payables ledger should be shown too.
Total.
This column is for showing the total amount of the payment. It is the total paid out of the business bank account.
Payables.
If the payment is to a credit supplier, the purchase was recorded at the time the purchase was made, including accounting for any sales tax on the transaction if appropriate. Here, the focus is upon the subsequent payment to clear the total amount due to the supplier. The total amount of the payment should also be entered in this column.
Other analysis columns.
The other analysis columns are for providing an analysis of payments other than payments to credit suppliers. They should be used for payments to suppliers who do not provide credit facilities (where the payment is supported by a cheque requisition), for payments of expenses, for payments of wages and salaries and for withdrawals of money from the bank for petty cash. Where there is an amount for sales tax in the payment, the sales tax element should be shown separately in the sales tax column, and the analysis columns for the expense should show the amount excluding sales tax. Each column should represent an account in the general ledger (such as an expense account or the sales tax account).
General ledger references.
The cash payments record should include general ledger account references to identify which general ledger accounts have been updated when the transactions have been processed. In addition, for payments to credit suppliers, there will also be a payables ledger reference to update the memorandum only individual payables ledger accounts.
Discount received column.
There may also be an additional memorandum column to show any early settlement discount received.
FFP makes the following payments in respect of various credit invoices and other items.
Enter these transactions into the cash payments record.
For a suggested answer, see the 'Answers' section at the end of the book.
The columns of the cash payrnents record should be totalled and arithmetic accuracy should be checked by adding up the totals of all the analysis columns (but not the total in the discounts received column) to agree to the total payments made.
Following on from the previous activity, total each of the columns of the cash payments record and check that the totals agree.
For a suggested answer, see the 'Answers' section at the end of the book.
On 22 June 20X3 Viking Paper made three cheque payments. The original documents for these transactions are given below.
Write up the relevant details of these documents in the cash payments record, and total all relevant columns.
Payables ledger references are the following:
Viking Paper always takes advantage of any settlement discounts offered from suppliers
NATIONAL SOUTHERN BANK
74 The High Street Bristol B54 7DX
Pay: Step Wholesale Supplies
Two-hundred dollars only
$200.00
A/C payee
22 June X3
Viking Paper
PJ Tooley
114321
80-24-18
27446879
NATIONAL SOUTHERN BANK
74 The High Street Bristol B54 7DX
Pay: Northern Telephone
Four hundred and nineteen dollars and 23 cents
$419.23
A/C payee
22 June
Viking Paper
PJ Tooley
114322
80-24-18
27446879
NATIONAL SOUTHERN BANK
74 The High Street Bristol B54 7DX
Pay: Computer Supplies
Six hundred and eighteen dollars and 26 cents
$618.26
A/C payee
22 June X3
Viking Paper
PJ Tooley
114323
80-24-18
27446879
For a suggested answer, see the 'Answers' section at the end of the book.