Cash and credit transactions in accounting

1. Cash and Credit
Transactions
Section 3 objective 2

2. Cash and Credit transactions
– Distinguish between cash and
credit transactions
• The use of
• Cash
• Cheques
• Debit & credit cards

3. 1. by Cash - the customer pays
right away by cash or cheque
2. on Credit - the customer pays
later
Cash and Credit transactions
There are two ways to sell or purchase
goods:

4. • Cash
transactions
– Can be identified
by
• The use of words
– Payments by…
– Collection of
cash or cheques
Cash and Credit transactions
• Posting of cash
transactions to
Books of original
entry
– entered in:
• Cash book
• Petty cash book
• General journal

5. Cash and Credit transactions
• Credit transactions
– Is on credit if the following applies:
• If it was described as the transaction took
place on credit
• The name of the supplier or customer was
mentioned
• If neither the words cash nor bank was
mentioned

6. Cash and Credit transactions
• Posting of credit transactions
to Books of original entry
– entered in:
• Purchases journal
• Sales journal
• Returns outwards journal
(purchases returns journal)
• Sales inwards journal (sales
returns journal)
• General journal

7. Cash and Credit transactions

8. • The use of cash :
– Used for frequent small
transactions such as
• Paying day to day
expenses
• Collections for
services rendered
• Balance paid or
received for
outstanding
balances
Cash and Credit
transactions

9. • The use of cheques:
– Used as a security measure for
not carrying large sums of cash.
Examples of usage of cheques
are
• Payment of cheques for
credit transactions
• Payment of expenses such
as salaries and wages to
employees
• Collections of cheques for
credit transactions
Cash and Credit
transactions

10. • The use of credit cards:
• Payment of cheques for credit
transactions
• Payment of expenses such as
salaries and wages to employees
• Collections of cheques for credit
transactions
• Making a purchase online or to a
major retailer
• For building credit
Cash and Credit
transactions

11. • The use of debit cards :
– Limits spending.
Cannot use card if
there is insufficient
funds in the account
– Useful for point of sale
for making purchases
or payment of bills (for
cash or on credit)
– Making payment
online
Cash and Credit
transactions

12. Cash and Credit transactions