accounting problem (1 Viewer)

[hatty]

hi

i am stuck on an acocunting question, please help me out if u can.

it says "october 5th, received $900 from customers on account"

does this mean i will record this in the general ledger under "cash" as an accounts receivable on the debit side?

thanks

 

[tristan88]

Posting from the cash receipts journal, you would credit Accounts Receivable/Debtors for $900 assuming there are no discounts. You shouldn't have to debit Bank, because you should have the total of the Cash Receipts on the debit side of the Bank, because, I'm presuming you are just posting totals from the journals.

If not, and you are doing individual entries, then debit Bank with 'Accounts Receivable' or 'Debtors' for $900, and credit, as stated, the 'Accounts Receivable' ledger, as Bank for $900.

Double-entry is easy enough, if you know atleast one side, it's always the opposite. (Like, Debtors are a Current Asset, so increases go on the credit side, and decreases go on the debit side.)

 

[hatty]

whoah

where'd u pluck "bank" from? do you mean a loan was taken out or something? i assumed the money was considered as revenue or something

 

[tristan88]

No, Bank, as in the Cash at Bank, like, money in the bank. Obviously if you're received money from a debtor, there is going to be an increase of $900 at one point.
This is not a revenue, if you have debtors, that means that there has been a credit sales previously, which would have been recognised as revenue.

 

[jase_]

Basically, the key words "customers on account" means that you're going to be using Accounts Receivable at some point. Basically, you are receiving $900 from a debtor whom owes you money.

At some point in the past, you issued an invoice for $900. Let's say it was for a piece of equipment which they bought off you on credit. So the entry would have been:

Dr Accounts Receivable $900
Cr Equipment $900
(Ignoring any accumulated depreciation, revaluations, gain/loss on disposals, etc for anyone who wants to be smart )

Now you would have issued an invoice for $900 to that person (lets say it just a customer in this case, though its the same entry with multiple customers kind of, but they haven't paid you cash yet. They owe you $900, so thats in your Accounts Receivable now, as an asset.

Now your entry is that, they have now paid you $900. So you would now transfer that $900 from Accounts Receivable into Cash at Bank, as you have received it now. So the entry would be:

Dr Cash at Bank $900
Cr Accounts Receivable $900


Hope that helps (and I hope that's what you were asking!). If you have to seperate multiple customers out, then really you'd just have a seperate Accounts Receivable account for each debtor and just divide up the $900 across them. Same entries as above.

All of this assumes your using a double entry, accrual based accounting system of course!

 

[hatty]

thanks alot for helping me out u guys.

jasee, i have yet to actually reach accrual, it's asknig me to "prepare a general ledger usnig T accounts", can you show me how to do that please?

and also, which textbook do u use at UTS ?

thanks alot dude

 

[jase_]

Alrighty, well its still the same process. It's still double entry accounting anyways.

Well I did the general journal entries for you already. You just need to put them into T accounts. Make one for each account, Accounts Receivable, Cash at Bank and depending on your question, what they bought. I'm guessing you have a number of exercises, so just work out what types of accounts you need. Someone from UNSW might be able to help you better, since they might have done the same questions . I thought I'd just input my general knowledge thats all.

In first year accounting, they use "Accounting" 4th edition by Horngren (2004), with Tyler's CD-ROM (Tyler is the guy who lecturer's the first accounting subject).

 

[hatty]

hey there

the book doesn't have the heading "cash in bank" (i think u might be to advanced or something, lol), only cash, is that what you mean?. and i think the $900 is for a service this firm provided some time ago (probably cleaning their laundry)

the only headings im allowed is

cash
accounts rec.
supplies
equipment
accounts pay.
revenue received in advance
share capital
dividends
laundry revenue
salaries expense
electricity

so what do you think i could do?

thanks

 

[redruM]

cash = cash in bank = cash at bank = cash = bank.

i'll try to go through what has happened in this situation.

oct 2nd- provided the service on credit, ie- earnt the revenue, but havent received the money for it.
DR A/Rec 900
CR Laundry Revenue 900

oct 5th- received $900 from customers on account.
DR CAB (cash at bank) 900 > this is to show how you have receieved cash, ie your cash level has gone up
CR A/Rec 900 > this is to show that you are not owed that amount anymore.

on T accounts it would look like:

to make the adjustment a bit clear you could see it as follows:
DR A/Rec - Mr. Garfield 900
CR Laundry Revenue 900

DR CAB 900
CR A/Rec - Mr. Garfield 900

it shows how the a/rec account is completed/finished off.

 

[hatty]

thanks alot for that man.

but i was wondering, here you wrote

"oct 2nd- provided the service on credit, ie- earnt the revenue, but havent received the money for it."
and then i got the money on the 5th, but what if i provided the service some time before the month of october? (and this ledger acocunt is only for the month of oct. i think)

the trial balance from the previous month (september 30) shows the account receivables at $2200 debit

does this change anything?

thanks

 

[redruM]

think about it.

a debit balance in a/rec at the end of sept means that you are owed $2200. the oct 2nd entry and 5th oct entry would cancel each other out, still leaving a balance of $2200

OR

are you saying that the 2nd oct entry that i made up doesnt exist in this month, ie- it was done in the previous month?

in that case, a/rec would have a bal of 2200 - 900 = 1300

 

[jase_]

No it makes no difference, unless its the end of your financial year, but even then, both Accounts Receivable and Cash are asset accounts and therefore will carry over to the next period.

Your revenue will go to 0 (at the end of the financial year), however you've already recognised revenue when you earned it (ie in this case october, but would be september or anything). When you pay off the money, your only touching the acct rev and cash accts, so that means you can pay it whenever you want as their balances will always carry over.

If that makes no sense to you, then don't worry, it will eventually, because the question you asked is a bit beyond what you're required to do, and when you do accrual's it will make more sense


Edit: ...and also what was said above!

 

[hatty]

hey dudes, thanks alot for that, you guys are cool

 

[Grizzly]

No worries hatty
a lot of pm's ur way =P