Which of the following is the best definition of the accounting term cash drawer
(1) The amount of cash put in the cash drawer at the beginning of each working shift, usually in a small amount. It will be used as change for cash transactions, because customers often do not pay the exact amount for the purchase in cash. Show
(2) The difference between the cash balance in businesses’ accounting system and the cash displayed in the company’s bank account balances. The difference can be due to the delays in processing paper checks, as it often takes some time for banks to receive a check and record it. For definition 1 The amount of cash float you need in the register should be determined at the beginning to control the fund and avoid theft. These rules should include the specific types of expenses that the float will be used for, the amount of money, and the frequency of replenishment. It is also advisable to put the money in a safe place, which is usually a locked cash drawer. In addition, cash floats should be monitored by a custodian, who is responsible for keeping accurate records of any increase/decrease in cash floats. Employees must be informed about the float establishment and ask for approval of the custodian to use the cash float. For definition 2 Cash float has 3 main types as the following:
For the best management for these types of cash float, businesses should maximize their disbursement floats and minimize collection floats. Keeping track of your cash, payables, and records can be challenging. Find out the most efficient ways to keep your money and your records in line and updated appropriately. If your company is a typical business, you deal with a variety of cash transactions. Lumping all these transactions into one record may be tempting, but it's almost always a bad idea. You'll want to record your cash transactions in a number of different ways, depending on the nature of your business.
Maintaining daily cash sheetsA cash sheet is a daily reconciliation of cash received and cash paid out. If a good deal of your business is transacted in cash, such as in a retail store, you should prepare a cash sheet at the end of each day. It's sound practice to deposit all cash receipts in your bank account daily. Your daily cash receipts should generally be the same amount as your daily bank deposit. Any reasons for a difference should be apparent on your cash sheet, such as a small amount of cash paid out for a miscellaneous expense.If they do not match, you should investigate and reconcile any discrepancies between the two amounts. Maintaining cash sheets provides an alert to any shortage or surplus of cash for the day. Some businesses opt to simply count the cash in the register at the end of the day without maintaining a cash sheet, leaving them clueless to any shortages or overages. A shortage could be the result of theft, or it could simply result from your failure to record a special transaction, such as an expense you paid in cash—but without a cash sheet, you'll never know. Among the Tools & Forms is a cash sheet for your use. Simply plug in your daily amounts to see instantly whether you have a cash shortage or surplus at the end of the day. You can use the spreadsheet over and over again for your daily needs. Preparing a bank reconciliationPreparing a bank reconciliation when you receive your bank statement every month helps you verify the amount of cash in your checking account. This reconciliation is necessary because the cash balance in your books will never agree with the balance shown on the bank statement. The delay in checks and deposits clearing the bank, automatic bank charges and credits you haven't recorded—and errors you may have made in your books—render the ideal impossible. After preparing the bank reconciliation, you can be comfortable that the account balance shown on your books is up-to-date, and gain insight into any irregularities such as employee theft of funds. Step-by-step instructions for preparing a bank reconciliation
In the above example, if the general ledger cash account does not show a balance of $3,851.26, you must track down the cause of the difference. If your bank reconciliation doesn't balance, you need to find the error or errors. The possible causes of a bank balance error comprise:
Maintaining a cash disbursements journalA cash disbursements journal is where you record your cash (or check) paid-out transactions. It can also go by a purchases journal or an expense journal. While you may, if you search heard enough, find print cash disbursement journals, we strongly recommend keeping this journal on your computer or in the cloud, like you do with most of your financial journals. Your accounting software will probably include some type of disbursement and purchase journals customizable to your business needs. Using accrual accounting and cash disbursement journalsIf you use the accrual basis of accounting, as we recommend, you'll record expenses in the cash disbursement journal at the time you pay for goods or services, or in the purchase journal if you purchase on credit. Accrual accounting example You own a variety store. You purchase from your main supplier, on account, items totaling $7,800. Most of the purchase is inventory for resale, but also included are $100 of office supplies. Make the following entry in your purchases journal: If the sum of the debit columns doesn't equal the sum of the credit columns, you have a problem that you should track down right away. You may have entered one of the amounts in the wrong column. You might have simply added incorrectly when computing the totals. It is usually easy to pinpoint the error because the debits should equal the credits for each transaction. Your purchases journal may have many more columns than this sample because you probably will have more expense classifications. Maintaining a petty cash fund and dealing with accounts receivableNearly all businesses need some cash on hand to pay small, miscellaneous expenses. The easiest way to keep this money available is through a petty cash fund, unless, your business has cash on hand from daily transactions. If you are use cash from the day's receipts for small expenses, must sure to accurately record all cash taken from the cash register and prepare a cash sheet at the end of the day to help control cash paid out of the register. Steps for creating a petty cash fund
How to use a petty cash fund Let's assume you decide to set up a petty cash fund to pay small expenses that you don't pay by check or debit card. You feel a petty cash fund of $100 is necessary, so you write a $100 check payable to "Petty Cash." You physically place the $100 in a petty cash box. Make the following entry in your cash disbursements journal: Debit CreditPetty cash 100Cash 100 Two weeks later, you review the petty cash box and find $25.00 left. You add the items listed on the expenditures list, and you are happy to find that they add up to $75.00 (25 + 75 = 100). You write a check, payable to "Petty Cash," for $75.00. The cash is placed in the petty cash box. This replenishes the fund back to $100. Using the list of petty cash expenditures as your source document, make the following entry in your cash disbursements journal: Debit CreditOffice supplies 13.20 Auto expenses 39.00 Misc. labor 15.00 Misc. expenses 7.80 Cash 75.00 The petty cash drawer or box should be locked when not in use. Only one person should have access to the petty cash, so that one person is held accountable for it. Understanding accounts receivableAccounts receivable (often abbreviated A/R) are simply unpaid customer invoices and any other money owed to you by your customers. The sum of all your customer accounts receivable is listed as a current asset on your balance sheet. Your accounting software should automatically keep an accounts receivable ledger account for each customer. The accounts receivable ledger, which can also double as a customer statement, serves as a record of each customer's charges and payments. Maintaining accounts receivable records When a customer purchases something, you'll want to:
If you extend credit to your customers and maintain a sales and cash receipts journal by hand, ensure your accounting software integrates posting to the accounts receivable ledgers with the recording of sales and cash receipts transactions automatically. Referred to as the "one-write" system, this time-saver also reduces the chance of posting errors. Keeping an accounts receivable ledger You must maintain an accounts receivable ledger account for each customer you extend credit to. Post your sales invoice charges from the sales and cash receipts journal to the customer ledgers at the end of each day. Also, whether you use a cash register or a separate cash receipts book, be sure to post cash receipts on account to the appropriate ledgers at the end of the day. Of course, your software should be able to take care of this automatically. If you like a paper trail, keep all your accounts receivable ledgers in one binder and let the copies of the accounts receivable ledgers also serve as the statements you mail to your customers in request for payment. If you mail them out as statements, begin a new ledger sheet every month. The monthly ledger sheet should start with a balance forward, which is the ending balance from the previous month. If your ledger sheets will not be doubling as your customer statements, you don't need to start a new sheet every month. Just keep a permanent ledger for each customer that maintains a running total of the customer balance. For most businesses, statements should be sent once a month to all customers with an account balance and include:
Keeping track of your control account When you mail statements to your customers every month, you should reconcile your accounts receivable ledgers with the accounts receivable control account. The control account is the total accounts receivable balance from your general ledger. The beginning accounts receivable total, plus charge sales for the month, minus payments on account for the month, should equal the ending accounts receivable total. Compare this amount to the sum of the individual customer accounts receivable ledgers. This will help you discover any errors in your customer statements before you mail them out. Your accounting software should notify you of discrepancies automatically. Handling your accounts payableAccounts receivable can be a little fun—after all, it's all about raking in your hard-earned dough. Accounts payable (often called A/P), on the other hand, focuses on the unpaid bills of the business—that is, the money you owe your suppliers and other creditors. The sum of the amounts you owe to your suppliers is listed as a current liability on your balance sheet. Preparing your accounts payable paperwork If you use the accrual basis of accounting, as we recommend, expenses are recorded in the cash disbursements journal at the time the goods or services are paid for or in the purchase journal if you buy on credit. If you deal with a given supplier many times during the month, you don't have to record every purchase. You could accumulate all bills for the month from that supplier, then record one transaction in the purchases journal at the end of the month. You should keep an accounts payable ledger account for each supplier. Expenses from the cash disbursements journal are, at the end of each day, posted to the appropriate accounts payable ledger. The accounts payable ledger is a record of what you owe each vendor. Ensure your accounting software automatically keeps separate ledgers as well as the general ledger. The general ledger contains an accounts payable account, which is your accounts payable control account. The cash disbursements journal has accounts payable credit and debit columns. Credit purchases and payments on account are entered in these two columns, respectively. At the end of the month they are totaled and posted to the control account in the general ledger. What is cash drawer in accounting?Your cash drawer, also called a register or till, stores cash, coins, checks, and other valuable items (e.g., coupons) at the point-of-sale (POS). At the end of each day, shift, or period, you must balance your cash drawer to account for all incoming transactions.
What is the drawer in a cash register called?A till is the drawer of a cash register, where the money is kept.
What does reconciling cash drawer mean?Reconciling a cash drawer is the process of checking each transaction that has taken place during a cash drawer session and confirming it against physical evidence of the transaction (cash, checks, credit card receipts, vouchers).
What is cash drawer balancing?'Balancing a cash drawer' refers to accounting for all incoming transactions processed during the shift. However, that includes not only cash transactions but also credit cards and tips. As a manager, you have to make sure that the tips have been distributed equally.
|