AS Accounting. Don't understand cash float.:(

[Sijan92]

What does cash float mean? And what is it's treatment? As in what should be credited and debited to treat cash float???

 

[mohsinsrk]

cash float is actually cash in hand...tREATMENT OF CASH FLOAT IS SAME AS CASH...PREPARE CASH ACCOUNT...DEBIT CASH FLOAT OPENING AND CREIT ALL CASH PAYEMENTS...IF CASH FLOAT CLOSING BALANCE IS GIVEN SO BALANCING FIG ON DEBIT WOULD BE RECEIPTS FROM DEBTORS..

 

[Sijan92]

Thanks. But in order to calulate total sales do we have to add the the closing balance of cash float?

 

[mohsinsrk]

TO COMPUTE TOTAL SALES REMEMBER THIS EQUATION.....TOTAL SALES= CREDIT SALES + CASH BANKED+ INCREASE IN CASH(DIFF BETWEEN CLOSING ND OPENING CASH FLOAT) +PAYMENT FROM CASH TAKING

EXAMPLE
THE FOLLOWING BALANCE FOR N.LEE

01 JAN 2010 31 DEC 2010
*TRADE RECEIVABLES 46400 15800
*CASH FLOAT 520 540

BANK ACCOUNTS SHOWS DEBIT RECEIPTS FROM DEBTORS OF $424000
FOLLOWING EXPENSES WERE PAID FROM CASH TAKING...$1000 WAGES AND $300 HEATING

CALCULATE TOTAL SALES..
SO SIMPLY U WOULD CALCULATE CREDIT SALES BY PREPARING SALES LEDGER CONTROL AC...WHICH WOULD BE (15800+424000-46400) $393400
plus 393400 + 20(increase in cash float 540-520)+1000+300 =total sales $394720

 

[Sijan92]

Thanks a bunch! GOD BLESS U. Btw, if there is a decrease in cash (c.balance lower than o.balance) then its included in the calculation of purchases ryt?

 

[mohsinsrk]

Thanks a bunch! GOD BLESS U. Btw, if there is a decrease in cash (c.balance lower than o.balance) then its included in the calculation of purchases ryt?

no prb......no if there is decrease in cash eg year 1 is $200 and in yr 2 it was $150...so we assume it as drawings and add it in drawings...