The Book-keepers Forum (BKF)
The Book-keepers Forum (UK) -> General Book-keeping & Accounting -> Question about transactions using both cash and something else
Post Info TOPIC: Question about transactions using both cash and something else
Rob-f58049


Senior Member

Status: Offline
Posts: 133
Date:
Question about transactions using both cash and something else
Permalink Closed

Hi.

[Quick introduction: My name is Rob and I am almost completely new to bookkeeping and accounting, except that I am the sort of person who keeps decent financial records for my own benefit. I have decided to retrain into the accounting profession, specialising in bookkeeping, and am going to start a course soon to get me going towards some kind of qualification. In the meantime, I have been practicing on myself, from transaction recording through to producing P&L and blance sheets for my own finances. Hello!]

And so on to my question.

I use one journal to record things I pay for using my credit cards, and one (ok, it's a book) for things I pay for using cash. I have a transaction where I went shopping in the supermarket and used cash to pay for some of it, then paid the balance using a card.

If I put these in as two transactions, one in each journal, I have to artificially split the total purchase cost of the shopping to balance each entry. But if I keep the shopping as a single total, I then would have a Credit Card Payable entry in a Cash Book, or vice versa, or no entry in either (if I were to put it in, say, the General Journal).

What is people's preferred practice for transactions like this?

Thanks in advance for any answers.



__________________
Rob
Shamus


Forum Moderator & Expert

Status: Offline
Posts: 11981
Date:
Permalink Closed

Hi Rob,

welcome to the forum.

Have you done T accounts yet?

The shopping would go to one T account matched by entries to the Cash and Card accounts.

The actual split for the shopping doesn't matter so long as it's recorded how much the shopping cost and where the money came from to pay for it.

kind regards,

Shaun.



__________________

Shaun

Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
Rob-f58049


Senior Member

Status: Offline
Posts: 133
Date:
Permalink Closed

Shamus wrote:

Hi Rob,

welcome to the forum.

Have you done T accounts yet?

 

Thanks! No, I haven't done them directly as such, but the book I was learning from mentioned them as an alternative to the way it describes things (using columned books where as many columns as needed may be used).

Shamus wrote:


The shopping would go to one T account matched by entries to the Cash and Card accounts.

The actual split for the shopping doesn't matter so long as it's recorded how much the shopping cost and where the money came from to pay for it.

 

Sounds very like the General Journal (or direct to Nominal Ledger) process, then.

The reason I'm confused about this is that I thought the point of having a cash book was to be a single place to record all transactions using cash. But now it seems it's that plus any nominal entries; a cash transaction is being recorded outside of the cash book.



__________________
Rob
Phoenix Orlando


Member

Status: Offline
Posts: 12
Date:
Permalink Closed

As an alternative to T accounts, you could have a single 'journal' with numerous columns as illustrated below:

Date |Transaction Description | Cash | Credit Card | Total

01 Jan | Waitrose | 21.00 | 22.00 | 43.00

Not sure if the formatting above will come out broken but the bars show the demarcations.



__________________

Phoenix Debola

Bookkeeper/Accountant

07803 704496
Rhianrach


Expert

Status: Offline
Posts: 1609
Date:
Permalink Closed

A cash book is a book of prime entry which in turn leads to the ledger. You can if you wish just combine both income cash and bank and receipts both bank and cash into either two seperate books or into one (although that could get messy). As above it can be used on its own to record everything you need, as long as your books are simple. T accounts are needed to simplify complicated books and therefore the accounting procedures that follow. I do both personally, sole traders with simple transactions, no assets bar a bank account I can do simply on excel in the form of a cash book and take my info from there. I also work for a busy partnership that really requires t accounts as things tend to get a lot more complicated.

In your example I personally would record the date, where the receipt is from, what its for (split it if for different things), net amount, vat, gross and payment method (split again if paid two seperate ways). That tends to get complicated, whereas if you had the receipt split into seperate nominals and the total in a creditors control you could just pay the balance however you like with card and cash.

__________________
Steve
Wella


Expert

Status: Offline
Posts: 2256
Date:
Permalink Closed

Rob-f58049 wrote:
.....................

Sounds very like the General Journal (or direct to Nominal Ledger) process, then.

The reason I'm confused about this is that I thought the point of having a cash book was to be a single place to record all transactions using cash. But now it seems it's that plus any nominal entries; a cash transaction is being recorded outside of the cash book.

 Just to clarify for your understanding, you also have to consider that in accounting terms cash does not have the same meaning as the normal use of the word. In this instance cash means anything paid immediately at point of sale (cash, bank , credit card), and not on an account. Purchases/ Sales on account go in to Day Books.

HTH

Bill



__________________

 

 
Rob-f58049


Senior Member

Status: Offline
Posts: 133
Date:
Permalink Closed

I thought I had got the hang of that!

I figured that credit cards were not counted as cash but instead as an Account Payable, since I am not actually paying anything at the time, but will do so later when I get my statement. The payment of that statement would be the cash transaction, otherwise I'd have a cash payment paying a cash purchase at a later date, which didn't make sense to me. I also didn't count this particular credit card purchase as going in a Purchases day book because I thought that was reserved for goods bought for the purposes of reselling later, which is not what I do with my shopping! (I have it as an expense instead.)

But what I have done re this whole question is to add columns for the credit cards on the credit side alongside the cash columns in my cash payments book. The food shopping then had one debit entry, the expense for supermarket shopping, and two figures on the credit side, one for the cash and one for the rest by credit card. This seemed the simplest suggestion and saves having to artificially split transactions.

At this point, though, I wonder how many of you are screaming and pulling your hair out in frustration having read that!



-- Edited by Rob-f58049 on Saturday 31st of March 2012 10:35:51 AM

__________________
Rob
Wella


Expert

Status: Offline
Posts: 2256
Date:
Permalink Closed

Hi Rob

My answer was from a purely theoretical/ text book terminology view point. If you think of the credit card account as an overdrawn bank account, it might help see where I'm coming from.

Your solution works, maybe add a third column for the bank account, and do a contra entry when card is paid off by bank account

Cash Book (Extract)
DRCR
20122012
DateDetailFolioCashBankC CardDateDetailFolioCashBankC Card
01-MarIncomeGL1 500 02-MarWaitrosePL2 2122
31-MarBalancec/d  2231-MarBalancec/d 479 
    50022    50022
            
01-AprBalanceb/d 479 01-AprBalanceb/d  22
30-AprBank  2230-AprC Card 22 
30-AprBalancec/d   30-AprBalancec/d 457 
    47922   

 

 
Wella


Expert

Status: Offline
Posts: 2256
Date:
Permalink Closed

Hmm think I broke the website no

Something went skewy with the formatting, and it wont let me edit it.

Hopefully you will see the cash book entries for paying with the card and bank, and the bank paying the card off



__________________

 

 
Rob-f58049


Senior Member

Status: Offline
Posts: 133
Date:
Permalink Closed

Re Sage: Heh, I'm used to using a product which (IMHO) is superior but which has the smaller market share - I'm a Linux user (not aiming for a debate here, just comparing). But like Windows, as we agree on, Sage is the market leader here for the sorts of companies I'd be working for, and therefore has the most job opportunities at the stage in my new career when getting experience is key. And also why I'm looking at so many options to get some certification at the least cost. Entry level jobs are ok for getting experience, though, and if someone is prepared to take on computer-literate person who has a Sage certification just to do data-entry, that's good enough to start.

Re Self employment: Yeah, I expect that I would end up doing the books for friends or friends of - I know one person directly who runs their own business and another who is self-employed - and then go from there. As for using Sage (or any other program) for being self-employed myself, there's always a spreadsheet. I'm not afraid to do the books manually.

It seems to me that becoming a good bookkeeper is not simply being able to work with numbers. I'm finding the actual methods of doing things quite obvious. The challenge comes in taking some obscure transaction and working out how to represent that using the methods available (as testified by alot of the posts I'm seeing here). As a programmer and designer, it's the same process: you can learn the programming language all you like, but if you can't design solutions you won't get very far. I'm good at coming up with software designs.

Re B190: You can get an idea what's on the course for now from this: http://www3.open.ac.uk/study/undergraduate/course/b190.htm

Re IT: I was in defence, mainly training systems using Ada. But I've done a fair bit of Project Planning as well.

Edit: That David Cox book you recommend; does anyone know what the benefit is of getting the third edition as opposed to the earlier ones? Is it just current HMRC legislation (and perhaps the odd correction), or has the content been significantly expanded?



-- Edited by Rob-f58049 on Monday 2nd of April 2012 03:17:58 PM

__________________
Rob
Rob-f58049


Senior Member

Status: Offline
Posts: 133
Date:
Permalink Closed

Thanks for that, yes, I see what is going on.

__________________
Rob
Shamus


Forum Moderator & Expert

Status: Offline
Posts: 11981
Date:
Permalink Closed

Hi Rob,

this is why thinking in T accounts (per Bill's example) rather than any alternative is so important when your starting out.

I've read through the thread and it feels as though you really have an excellent grip of what's going on.

I know that T accounts aren't the sexiest of subjects and when working in the real world you never use them (even though you always think in them) but they really are the foundations of everything that you will be doing going forwards.

Which is the course that you are going to be doing? Is it attached to the qualifications of a professional body or stand alone?

Talk in a bit,

Shaun.

__________________

Shaun

Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
Wella


Expert

Status: Offline
Posts: 2256
Date:
Permalink Closed

Shamus wrote:

.....


I know that T accounts aren't the sexiest of subjects .......

 Morning Shaun

Don't know what you mean, of course they're sexy biggrin

Bill

 



__________________

 

 
Shamus


Forum Moderator & Expert

Status: Offline
Posts: 11981
Date:
Permalink Closed

Morning Bill,

well yes, to us they are but try selling them to people new to this.

Seems like selling someone on the idea of mortar. Yes it holds all of the bricks of a house together but nobody ever notices it.

You could in fact build the house without the mortar. Wouldn't be very stable but you could still build it.

T accounts to my mind, whether on paper or just in one's head are the mortar of bookkeeping and bookkeeping is the foundations of accountancy.

Spread the word

All the best,

Shaun.

P.S. What on earth have you done to this page! If you break the site your not getting a new one! wink



__________________

Shaun

Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
Rob-f58049


Senior Member

Status: Offline
Posts: 133
Date:
Permalink Closed

Hi Shaun,

I guess a more detailed introduction to the one I gave above is in order, then.

I'm starting the OU B190 "Introduction to book-keeping and accounting" in May with an aim to complete the K01 "Professional certificate in accounting". I decided on the change of career (from IT) a couple of months ago, and figured that I'd need some kind of qualification to get anywhere. So I looked around locally for courses, plumping for the OU as seeming to be the most flexible around a job or whatever else might go on, as well as the fact that I could get help with the funding. Plus I have the option to continue on to a diploma or BA in Business Studies if I found that side of it interesting enough.

From the course description: "Introduction to bookkeeping and accounting (B190) is accredited by the International Association of Book-keepers (IAB). The course provides exemption from both their Level 2 Certificate in Book-keeping and also their Level 3 Diploma in Accounting and Advanced Book-keeping. Therefore on successful completion of B190 students will be able to apply to become Members of the IAB.".

The K01 certificate gives access to a number of other bodies as well, and of course is in itself a qualification. The latest list is here: http://www.open.ac.uk/business-school//files/business-school/Accreditations_update.pdf and for sure by the time I get the K01 I will know which one (or ones?) I'll be joining.

Seems like a plan.

Then I decided I wanted to get a head start on the course. So I borrowed "Bookkeeping for Dummies" from the library and worked through that, setting up a spreadsheet to practice with my own finances. That book briefly mentioned T accounts but worked using columned journal books, hence that is how I eventually came to asking the question of this topic.

I then found this forum, and through reading a while on this discovered the alternative routes of qualification through the various professional bodies directly. I knew that the OU course could help me become a member of the IAB, etc, but didn't go for learning entirely through them; I felt that would restrict me if I made the wrong choice of body, so I am not unhappy with my choice of course provider. I also bought Margaret Nicholson's "Mastering Accounting Skills" as a result of some other topic on here, and an A4 lined manuscript book, and am currently working my way through all the exercises in that now. I'm going to need more of those manuscript books! So now I am using T accounts.

I am finding from looking at job adverts that in alot of cases, "experience" seems to mean "Sage experience"; one job advert pretty much said "we don't care if you don't know bookkeeping, we'll train you, but we want you to have had Sage experience" - daft, I know, but (all considerations of what the best software is aside) Sage seems a way in. Thus I've been looking at using my ILA and/or self-teaching means to get some kind of Sage certification, as posted elsewhere here. Yet to decide exactly what I'm doing with that, though, because the B190 course includes "a brief introduction to Sage accounting software" - so I may be able to self-teach myself Sage with a book and the software that the OU provides, and then just pay Sage directly to get certification without actually having to buy the courses along the way.

Phew!


__________________
Rob
Shamus


Forum Moderator & Expert

Status: Offline
Posts: 11981
Date:
Permalink Closed

Hi Rob,

you have to allow for the fact that some of the people who place job ad's are idiots. Any job that wants someone who can use Sage but not understand what they are using it for is basically after a data input clerk. Not exactly the sort of thing that one spends a fortune studying to work towards!

Whilst it's important to know how to use Sage it's not the be all and end all. Larger businesses tend to use SAP. In the small to mid range market Sage currently has the lions share of the market in the UK whereas on the other side of the pond my impresssion is the Quickbooks is the market leader.

Playing the percentages game Sage is currently a good bet for a requirement for a role but don't expect it to be the deal breaker that Sage would have us all believe.

Employers want relevant experience and you end up in a catch 22 that you cannot get the experience without qualifications but having the qualifications is no guarantee of finding a role in order to gain the experience.

For that reason many people end up going down the self employed route to gain experience. That could eother be through temping or by setting up one's own practice. If the latter case, the price of Sage licencing would cripple manyy small practices but thankfully there are other alternatives available. (My favorite which I actually think is better than Sage is VT Transaction+, however to use that you have to understand bookkeeping properly which with Sage I don't feel that you do).

The ICB have the right approach in that at level I you must show a basic understanding of bookkeeping before moving onto computerised bookkeeping using Sage (or an equivalent) at level II.

The margaret Nicholson book is a fine starting point although I must admit to finding it very dry reading at times making it difficult for me to complete.

A very good book that I would highly recommend and that you might enjoy is Business Accounts for book-keeping and financial accounting courses by David Cox, Osbourne Books.

A good book for additional practice for B190 is the AAT revision companion for units 1-4 from BPP.

OU B190 is a fine introduction. When you're on the course it might be worth giving the site an update as to the new course content.

This is a course that I did as a precursor to the Certificate in Accounting (then called B680). At that time B190 was the EQL CD course in bookkeeping which is basically the same course as the the AAT ABC bookkeeping course, although ten years on I suspect that in order for the IAB to rate it so highly the course material must have expanded.

Certainly it's an excellent introduction to bookkeeping and will give you great foundations to move forwards in your career change.

On the moving from IT side which area were you in? I worked on mainframe systems in the banking sector. More recently mainly on the business analysis side but my foundations were in systems development using COBOL, CICS, DB2 and IMS.

Personally after B680 I took the ACCA route.... However, if you choose that route beware that there are major problems with self employment caused by ACCA regulation 8.

You've certainly found a great little site here for help and support in your studies. Many of the members are bookkeepers and accountants in practice so you get answers from the real world... And you'll soon find that for many questions there are half a dozen all equally valid answers! We even had a bit of a technical debate on here the other day about the format of a balance sheet with everyone involved in the conversation being correct but assuming that others were wrong!

talk soon,

Shaun.

__________________

Shaun

Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
Page 1 of 1  sorted by
 
Quick Reply

Please log in to post quick replies.
The Book-keepers Forum (UK) -> General Book-keeping & Accounting -> Question about transactions using both cash and something else
Tweet this page Post to Digg Post to Del.icio.us
Members Login
Username 
 
Password 
    Remember Me  
©2007-2024 The Book-keepers Forum (BKF). All Rights Reserved. The Book-keepers Forum (BKF) is a trading division of Bookcert Ltd. Registered in England Company Number 05782923. 2 Laurel House, 1 Station Rd, Worle, Weston-super-Mare, North Somerset, BS22 6AR, United Kingdom. The Book-keepers Forum and BKF are trademarks of Bookcert Ltd. This forum is a discussion forum only. There will usually be more than one opinion to any question and any posting should not be viewed as a definitive solution. No responsibility for loss occasioned to any person acting or refraining from action as a result of any posting on this site is accepted by the contributors or The Book-keepers Forum. In all cases, appropriate professional advice should be sought before making a decision. We reserve the right to remove any postings which are offensive, libellous, self-promoting or engaged in covert marketing. We will not notify users of removals. The views expressed in the forum posts are those of the individual and do not necessary reflect or agree with those of The Book-keepers Forum. Any offensive or unsuitable posts will be removed by the moderators. Any reader of this forum can request for a post to be looked into by sending an email to: bookcertltd@gmail.com.

Privacy & Cookie Policy  About