Prepare and Process Banking Documents

Prepare and process banking documents

Contents

Introduction

Recording cheques in a cash payments journal

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Introduction

Our focus will be on recording cheques—a source document—in a cash payments journal.

Recording cheques in a cash payments journal

The source document which represents a payment is a cheque.

Cheques differ from the other source documents, such as tax invoices and tax adjustment notes in that businesses do not keep duplicate copies of cheques.

The details of a cheque are written on the cheque butt. In small businesses, itis the cheque butt which is used to record the transaction in the cash payments journal.However, in larger organisations, a payment voucher is often used.

The purpose of the payment voucher and the cheque butt is to record the details of the cheque drawn, the details of any discount received and GST paid. The voucher and the cheque may be written simultaneously using a computer. Or, the cheque is drawn from the payment voucher and the details of the cheque are completed when the cheque is drawn/written.

Here we will use the payment vouchers. In the activities you’ll use both methods.

Sometimes a cheque may be written out incorrectly, or may not be used. Rather than altering the cheque, it is sometimes best to cancel the cheque. Ifthis should happen, the word ‘cancelled’ should be written across the cheque and cheque butt and the cheque kept with the butt, as it is an accountable document.

If payment vouchers are used, the word ‘cancelled’ should also be written across the payment voucher.

GST and discounts

Examine the two documents (payment voucher and cheque) that follow.

WESELLIT DEPARTMENT STORE
ABN: 42 704 695 778
PO Box 579 Lyneham 2387
Telephone: (057) 473 7436 Facsimile: (057) 473 7435
Payment voucher No: 568 / Date: 17 March 20xx[A]
Amount due: $636.56
Description / Cheque Number / Amount
Monthly account of:
North East Wholesalers [C] / 100024 [B] / $620.65
[E] & [F]
Discount (including discount of 1.45) / $15.91 [D]
Signature: M M Smyle

Figure 1: The payment voucher

Date: 17 March 20xx
[A] / NATWEST BANK
Lyneham Branch
17 March20xx
Payee: North East Wholesalers[C]
FWD:
DEPS:
This cheque: $620.65[E][F]
Balance: / Pay North East Wholesalers ...... or bearer
The sum of Six hundred and twenty dollars and sixty-five cents
...... $620.65
M M Smyle
Discount: $14.46 [D]
$ 1.45 (GST)
100024 [B] / WESELLIT DEPARTMENT STORE
[100024] [2423 768: 1574683 3184]

Figure 2: The cheque is to be sent to the seller in payment of the account

Look at the payment voucher and cheque illustrated in Figures 1 and 2 and pay special attention to the letters (A–F) on the payment voucher and the sixletters on the cheque butt.

Note that the amount entered into the Accounts payable column is actually the total of the cheque drawn and the discount received. The amount that we owed the supplier must be reduced by both those amounts (see [E]).

All the information at each one of these letters is recorded in the cash payments journal as follows:

Cash payments journal—Wesellit Department Store

CPJ
Date / Cheque Number / Particulars / Fol / Bank / Discount
received / Accounts payable / GST input tax credit / General
20xx / $ / $ / $ / $
Mar 17 / 100024 / North East Wholesalers / 620.65 / (14.46) / 636.56 / (1.45)
(A) / (B) / (C) / (F) / (D) / (E) / (D)

Figure 3: An entry in the cash payments journal

Your practice

Now take a sheet of your multi-column journal paper. Write the headings on each column of your paper exactly as they are on the example above. If your journal paper does not have at least eight columns, you will have to rule lines neatly to make eight columns.

Now copy the entry for the payment voucher exactly as it is in the example above. As you do this, make sure you refer back to the payment voucher and cheque butt so that you can see where the information for this entry came from.

Now we’ll show you the completed cash payments journal for one month.

Cash payments journal - Wesellit Department Store

CPJ
Date / Cheque number / Particulars / Fol / Bank / Discount received / Accounts payable / GST Clearing / General
20xx
Feb 6 / 100011 / Brady & Sons / $
208.90 / $
(4.75) / $
214.13 / $
(0.48) / $
6 / 100012 / Colliers & Jordan / 153.60 / 153.60
6 / 100013 / Hutchinson Pty Ltd / 412.85 / (8.32) / 422.00 / (0.83)
13 / 100014 / Southern Empire / 96.87 / (2.21) / 99.30 / (0.22)
13 / 100015 / Purchases / 362.70 / 32.97 / 329.73
20 / 100016 / V J Fleet Pty Ltd / 109.45 / (2.36) / 112.05 / (0.24)
20 / 100017 / Cancelled
28 / 100018 / Magic Toy Co / 211.65 / (4.15) / 216.22 / (0.42)
1 556.02 / (21.79) / 1 217.30 / 30.78 / 329.73

Figure 4: Entries for one month in the cash payments journal

Notice that cheque number 100015 was drawn to ‘purchases’ rather than toan accounts payable. This transaction is a cash purchase, that is, the business bought goods for resale and paid cash for the purchases at the time of the payment.

Refer to cheque number 100017 on 20 February (Figure 2). This cheque was cancelled. It is very important that cheque numbers appear in a continuous sequence and that any cancelled cheques are recorded. Notice that no figures occur in the cheque amount column, or any other columns. The cheque will not be used, so we will not actually lose any money from our bank account.

Now you have a go.

/ Activity 1

Using the cash payments journal above as a guide, enter the following payment vouchers in the cash payments journal for Wesellit Department Store for the month of March. Total the journal for the month and check your calculations.

Use your own journal paper. Make sure you write all the headings correctly on your multi-column journal paper.

WESELLIT DEPARTMENT STORE
ABN: 42 704 695 778
PO Box 579 Lyneham 2387
Telephone: (057) 473 7436 Facsimile: (057) 473 7435
Payment voucher no: 563 / Date: 10 March 20xx
Amount due: $164.38
Description / Cheque number / Amount
Monthly account Ray White Ltd / 100019 / $160.27
Discount (including GST of $0.37) / $4.11
Signature: M M Smyle
WESELLIT DEPARTMENT STORE
ABN: 42 704 695 778
PO Box 579 Lyneham 2387
Telephone: (057) 473 7436 Facsimile: (057) 473 7435
Payment voucher no: 564 / Date: 10 March 20xx
Amount due: $222.47
Description / Cheque number / Amount
Monthly account of Elgety’s Pty Ltd / 100020 / $216.91
Discount (including GST of $0.51) / $5.56
Signature: M M Smyle
WESELLIT DEPARTMENT STORE
ABN: 42 704 695 778
PO Box 579 Lyneham 2387
Telephone: (057) 473 7436 Facsimile: (057) 473 7435
Payment voucher no: 565 / Date: 15 March 20xx
Amount due: $323.67
Description / Cheque number / Amount
Monthly account of Mr Garry Kirk / 100021 / $323.67
Discount / $0.00
Signature: M M Smyle
WESELLIT DEPARTMENT STORE
ABN: 42 704 695 778
PO Box 579 Lyneham 2387
Telephone: (057) 473 7436 Facsimile: (057) 473 7435
Payment voucher no: 566 / Date: 15 March 20xx
Amount due: $409.75
Description / Cheque Number / Amount
Monthly account of Hutchinson Pty Ltd / 100022 / $399.51
Discount (including GST of 0.93) / $10.24
Signature: M M Smyle
WESELLIT DEPARTMENT STORE
ABN: 42 704 695 778
PO Box 579 Lyneham 2387
Telephone: (057) 473 7436 Facsimile: (057) 473 7435
Payment voucher no: 567 / Date: 17 March 20xx
Amount due: $266.00
Description / Cheque Number / Amount
Monthly account of Brady & Sons / 100023 / $266.00
Discount / $0.00
Signature: M M Smyle
WESELLIT DEPARTMENT STORE
ABN: 42 704 695 778
PO Box 579 Lyneham 2387
Telephone: (057) 473 7436 Facsimile: (057) 473 7435
Payment voucher no: 568 / Date: 17 March 20xx
Amount due: $636.56
Description / Cheque Number / Amount
Monthly account of North East Wholesalers / 100024 / $620.65
Discount (including GST of 1.45) / $15.91
Signature: M M Smyle
WESELLIT DEPARTMENT STORE
ABN: 42 704 695 778
PO Box 579 Lyneham 2387
Telephone: (057) 473 7436 Facsimile: (057) 473 7435
Payment voucher no: 569 / Date: 24 March 20xx
Amount due: $361.13
Description / Cheque Number / Amount
Monthly account of N D L O’Brien / 100025 / $356.62
Discount (including GST of 0.41) / $4.51
Signature: M M Smyle
WESELLIT DEPARTMENT STORE
ABN: 42 704 695 778
PO Box 579 Lyneham 2387
Telephone: (057) 473 7436 Facsimile: (057) 473 7435
Payment voucher no: 570 / Date: 24 March 20xx
Amount due: $1 047.12
Description / Cheque Number / Amount
To wages / 100026 / $1 047.12
Discount / $0.00
Signature: M M Smyle

Check your answers with those given at the end of the document.

If you had any problems go back to the original payment voucher, and check where you went wrong.

Here are a few things to check for in the cash payments journal.

1Did you enter the correct figures in the correct column every time?

2Did you only enter the amounts the cheques were actually drawn for in the bank column? Remember, the discount received and GST is not included in the bank column.

3Did you leave out a payment voucher? Always check that you are working on the next cheque number and that no numbers have been missed.

4Did you include the total of the cheque and the discount in the Accounts payable column?

If you made any errors in the activity, then go back, correct and initial the errors.

Now, let’s do a few more cash payment journals.

/ Activity 2

On your own journal paper, enter the following payments using the cheque butts provided for Karper & Karper.

8 April 20xx
Payee:Summerville Hardware
For:MarchMonthly Account
Discount $ 10.57 (incl GST of 0.96)
FWD:
Deposits:
This cheque: $823.43
Balance:
987652 / 20 April 20xx
Payee:R & R Supplies
For:MarchMonthly Account
Discount $0.00
FWD:
Deposits:
This cheque: $386.38
Balance:
987654
12 April 20xx
Payee:G & C Pearson
For:MarchMonthly Account
Discount $ 2.94 (incl GST of 0.27)
FWD:
Deposits:
This cheque:$95.07
Balance:
987653 / 24 April 20xx
Payee:Hardware Suppliers
For:MarchMonthly Account
Discount $ 0.00
FWD:
Deposits:
This cheque:$240.35
Balance:
987655

Check your answers with those given at the end of the document.

How did you go? If you had any errors go back to the original cheque butt and see where your errors occurred. Make the corrections on your journal and initial them.

/ Activity 3

On your own journal paper enter the cheque details from the following payment vouchers for Farmer’s Cooperative.

FARMER’S COOPERATIVE
Payment voucher no: 1076 / Date: 5 Sept 20xx
Amount due: $194.40
Description / Cheque Number / Amount
To electricity monthly account:
Country Power / 876325 / $194.40
Discount / $0.00
Electricity includes GST of $17.67
Signature: M M Smyle
FARMER’S COOPERATIVE
Payment voucher no: 1077 / Date: 12 Sept 20xx
Amount due: $2 292.69
Description / Cheque Number / Amount
Monthly account of
Australian Independent Suppliers / 876326 / $2 246.84
Discount (includes GST of 4.17) / $45.85
Signature: M M Smyle
FARMER’S COOPERATIVE
Payment voucher no: 1078 / Date: 15 Sept 20xx
Amount due: $334.40
Description / Cheque Number / Amount
Monthly account of
Progressive Seeds Pty Ltd / 876327 / $330.22
Discount (includes GST of 0.38) / $4.18
Signature: M M Smyle
FARMER’S COOPERATIVE
Payment voucher no: 1079 / Date: 30 Sept 20xx
Amount due: $1 124.95
Description / Cheque Number / Amount
Monthly account of
Blue Ribbon Suppliers / 876328 / $1 124.95
Discount / $0.00
Signature: M M Smyle

Check your answers with those given at the end of this document.

You will have realised from entering the cheques into the cash payments journal that businesses make many payments—for electricity, postage, travel, wages and so on. These payments are entered in the general column of the journal.

/ Activity 4

Answer the following questions.

1The source document for purchases returns entered into the purchases journal is the ______.

2Invoices received from suppliers of goods for resale are entered in the ______Journal.

3Payment vouchers record the details of ______drawn.

4Discount received is / is not given by every accounts payable.

5It is very important to make sure no cheque numbers are ______in the cash payments journal.

6Even ______cheques must be recorded in the cash payments journal.

7What is an accounts payable?

______

______

8What is the difference between an account payable and a creditor?

______

______

9What details of a cheque should be recorded if the cheque is cancelled?

______

______

Check your answers with those given at the end of this document.

Feedback to activities

Activity 1

Cash payments journal—Wesellit Department Store

CPJ 1
Date / Cheque number / Particulars / Fol / Bank / Disc
rec / Accounts payable / General / GST
20xx / $ / $ / $ / $ / $
Mar 10 / 100019 / Ray White Ltd / 160.27 / (3.71) / 164.38 / (0.37)
10 / 100020 / Elgety’s Pty Ltd / 216.91 / (5.05) / 224.47 / (0.51)
15 / 100021 / Mr Garry Kirk / 323.67 / 323.67
15 / 100022 / Hutchinson Pty Ltd / 399.51 / (9.31) / 409.75 / (0.93)
17 / 100023 / Brady & Sons / 266.00 / 266.00
17 / 100024 / North East Wholesalers / 620.65 / (14.46) / 636.56 / (1.45)
24 / 100025 / N D L O’Brien / 356.62 / (4.10) / 361.13 / (0.41)
24 / 100026 / Wages / 1 047.12 / 1 047.12
3 390.75 / (36.63) / 2 385.96 / 1 047.12 / (3.67)

Activity 2

Cash payments journal—Karper & Karper

CPJ 1
Date / Cheque number / Particulars / Fol / Bank / Disc
rec’d / Accounts payable / General / GST
20xx / $ / $ / $ / $ / $
Apr 8 / 987652 / Summerville Hardware / 823.43 / (9.61) / 834.00 / (0.96)
12 / 987653 / G & C Pearson / 95.07 / (2.67) / 97.98 / (0.27)
20 / 987654 / R & R Suppliers / 386.38 / 386.38
24 / 987655 / Hardware Suppliers / 240.35 / 240.35
1 545.23 / (12.28) / 1 558.74 / (1.23)

Activity 3

Cash payments journal—Farmer’s Cooperative

CPJ 1
Date / Cheque Number / Particulars / Fol / Bank / Disc
rec / Accounts payable / General / GST
20xx / $ / $ / $ / $ / $
Sept 5 / 876325 / Electricity / 194.40 / 176.73 / 17.67
12 / 876326 / Australian Independent Suppliers / 2 246.84 / (41.68) / 2 292.69 / (4.17)
15 / 876327 / Progressive Seeds P/L / 330.22 / (3.80) / 334.40 / (0.38)
30 / 876328 / Blue Ribbon Suppliers / 1 124.95 / 1 124.95
3 896.41 / (45.48) / 3 752.04 / 176.73 / 13.12

Activity 4

1The source document for purchases returns entered into the purchases journal is the tax adjustment note/credit note.

2Invoices received from suppliers of goods for resale are entered in the purchases journal.

3Payment vouchers record the details of cheques drawn.

4Discount received is not given by every accounts payable.

5It is very important to make sure no cheque numbers are missed (left out) in the cash payments journal.

6Even cancelled cheques must be recorded in the cash payments journal.

7An accounts payable is a person or business to whom our business owes money.

8There is no difference between an account payable and a creditor. Thesetwo terms mean the same thing.

9The details of a cancelled cheque which should be recorded in the cash payments journal are the date and the cheque number. The word ‘cancelled’ should be written in the particulars column.

Prepare and process banking documents1

© NSW DET 2006 2006/053/12/2006 LRR 4662