Different treat of CIT with same scenario between Q1 Jun 2013 & Q3 Dec 2014

It depends which company has a positive and which has a negative bank account.

If a company has a bank overdraft and cash in transit is about to be received, surely that will reduce the overdraft

But if a company has money in the bank and cash is due to be received, that will increase the positive bank balance

The thing to remember is that we accelerate the in transit items into the records of the receiving company

Does that make it any clearer?

You’re welcome

PLEASE!!!! DO NOT POST YOUR QUESTIONS MULTIPLE TIMES!!

:-(((

Here is the answer that I have given to you in your Recent Posts question

Open two T Accounts

The first is in Plastik’s records and is called Receivables Account and it includes an amount of $1,200,000 receivable from Subtrak

The second is in Subtrak’s records and is called Payables Account and includes an unknown amount payable to Plastik

However, we ARE told that there is $400,000 in transit from Subtrak to Plastik, so let’s record that

When we accelerate that cash into Plastik’s records, we shall Dr Cash (or, in this case, Dr Overdraft) and Cr Receivables Account with $400,000

The Receivables line now looks like:

$4,700,000 – $400,000 + $2,500,000

And the Overdraft line looks like $1,700,000 – $400,000

And now the Receivable from Subtrak in Plastik’s records shows an amount of $1,200,000 – $400,000 = $800,000 and the Current Accounts reconcile so we can cancel that $800,000 from both Receivables and Payables

Now the Receivables line looks like:

$4,700,000 – $400,000 – $800,000 + $2,500,000 = $6,000,000

The overdraft line looks like:

$1,700,000 – $400,000 = $1,300,000 and

the Payables line looks like:

$3,400,000 + $3,600,000 – $800,000 = $6,200,000

OK?

Reply

You’re welcome (and no harm done about the multiple posts. But please, in future, try to avoid such errors!)