• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
Free ACCA & CIMA online courses from OpenTuition

Free ACCA & CIMA online courses from OpenTuition

Free Notes, Lectures, Tests and Forums for ACCA and CIMA exams

  • ACCA
  • CIMA
  • FIA
  • OBU
  • Books
  • Forums
  • Search
  • Register
  • Login
  • ACCA Forums
  • Ask ACCA Tutor
  • CIMA Forums
  • Ask CIMA Tutor
  • FIA
  • OBU
  • Buy/Sell Books
  • All Forums
  • Latest Topics

PQ Awards Nominations

Please help us to win one of the PQ Magazine awards and send in the voting form >>
You can nominate us in any or all of the following categories: Online College of the Year, Study Resource of the Year, Private Sector Lecturer of the Year, and Accountancy Personality of the Year.

Specially for OpenTuition students: 20% off BPP Books for ACCA & CIMA exams – Get your BPP Discount Code >>

cash in transit

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FR Exams › cash in transit

  • This topic has 3 replies, 2 voices, and was last updated 7 years ago by MikeLittle.
Viewing 4 posts - 1 through 4 (of 4 total)
  • Author
    Posts
  • December 2, 2015 at 12:56 pm #286978
    linluo
    Member
    • Topics: 7
    • Replies: 3
    • ☆

    Dear Sir,

    This seems to be a simple issue, but I do see so many different answers. Sometimes the cash in transit is a liability and sometimes it is an asset. Also a bit confused by how much is to be deducted from receivables and payables. Could you please advise a conclude method for determining how much should be deduct in receivable, how much in payable and in cash in transit, thanks.

    December 2, 2015 at 3:15 pm #287007
    MikeLittle
    Keymaster
    • Topics: 26
    • Replies: 22714
    • ☆☆☆☆☆

    Ok, but it would really help if you were confident with double entry!

    Consider the amount of cash and from whence it is flowing (to whither it is flowing)

    The company that has sent the cash has already recorded it within its own double entry so we only need consider the company that is to receive the money.

    And that’s easy enough! We pretend that the money has already arrived and now we record the double entry that is necessary to record the receipt

    So, in the receiving company’s statement of financial position, on the face of the question paper, increase the cash figure and reduce the receivables figure by the value of the cash in transit

    I can’t understand your comment that “sometimes the cash in transit is a liability and sometimes it is an asset”

    How can cash in transit ever be a liability?

    What you are maybe thinking about is the credit entry involved in recording cash in transit Dr Cash and CR RECEIVABLES, but no way is it a liability

    The same principles apply to goods in transit – the company sending the goods will have recorded the despatch but the company due to receive them does not yet know about these goods.

    Working on the value of the goods (give in the question) pretend that they are just being received immediately before the year end. The double entry to record those goods is:

    Dr Purchases
    Cr Payables

    VERY occasionally we have the situation where goods are being returned (very rare in exams). If, by some unlucky chance you should be faced with this, remember that the “sending” company has already recorded these goods being returned (Dr Payables Cr Purcases)

    Now pretend that these returns are received just before the year end and record their receipt:

    Dr REVENUE
    Cr Receivables

    But that is exceedingly rare

    Is that better?

    December 4, 2015 at 8:37 pm #287664
    linluo
    Member
    • Topics: 7
    • Replies: 3
    • ☆

    Dear Sir,

    Here are the questions and treatments that don’t appear to be consistent

    1) question from 4 Dec 2014
    P had a treat receivables balance owing from s of 1.2m as at 30.09.14. This differed to the equivalent trade payable of S due to a payment by S of 0.4m made in Sep which didn’t clear P’s bank until 4.10.14. P’s policy for cash timing differences is to adjust the parents financial statements.
    A: trade receivables -1.2m
    trade payables -0.8m
    bank overdraft -0.4m

    2) question from BPP Mock exam 1
    S’ current account balance with P at 31.03.x3 was 2.8m, on which didn’t agree with P’s equivalent receivable due to a payment of 0.9m made by S on 28.03.x3, which was not received by P until 3.04.x3.
    A: trade receivables -0.9m-2.8m
    bank -0.9m
    trade payables -2.8m
    Tried to apply your method, however, it doesn’t appear to be that straightforward.
    Your time and help will be highly appreciated.

    December 4, 2015 at 8:56 pm #287671
    MikeLittle
    Keymaster
    • Topics: 26
    • Replies: 22714
    • ☆☆☆☆☆

    First question:

    1) question from 4 Dec 2014
    P had a treat receivables balance owing from s of 1.2m as at 30.09.14. This differed to the equivalent trade payable of S due to a payment by S of 0.4m made in Sep which didn’t clear P’s bank until 4.10.14. P’s policy for cash timing differences is to adjust the parents financial statements.
    A: trade receivables -1.2m
    trade payables -0.8m
    bank overdraft -0.4m

    So, one step at a time …..

    Accelerate the cash into P’s records:

    Dr Cash (reduce the overdraft) $400,000
    Cr Receivables $400,000 bringing the receivable figure down to $800,000

    Now cancel the receivable and the payable:

    Dr Payables $800,000
    Cr Receivables $800,000

    or, as above:

    Cr trade receivables -1.2m
    Dr trade payables -0.8m
    Dr bank overdraft -0.4m

    Second question:

    S’ current account balance with P at 31.03.x3 was 2.8m, on which didn’t agree with P’s equivalent receivable due to a payment of 0.9m made by S on 28.03.x3, which was not received by P until 3.04.x3.
    A: trade receivables -0.9m-2.8m
    bank -0.9m
    trade payables -2.8m

    S is making the payment. Accelerate the $900,000 into P’s records, so:

    Dr Cash (reduce overdraft) $900,000
    Cr Receivables in P $900,000

    Now the current accounts agree and, according to the question, the S record’s Current Account with P was $2,800,000 and we haven’t made any adjustment to the S records

    So when the current accounts agree (as we’ve just agreed that they do after the cash in transit has been recorded) then we can cancel $2,800,000 receivables against $2,800,000 payables

    Or, as above:

    CR trade receivables -0.9m-2.8m
    Dr bank -0.9m
    Dr trade payables -2.8m

    Where is there an inconsistency?

  • Author
    Posts
Viewing 4 posts - 1 through 4 (of 4 total)
  • You must be logged in to reply to this topic.
Log In

Primary Sidebar

ACCA News:

 

ACCA My Exam Performance for non-variant Applied Skills exams is available NOW

NEW! Download the ACCA Pass Guide

FREE Verifiable CPD for ACCA Members

ACCA mock exams and debrief videos

ACCA Options:  “Read the Mind of the Marker” articles

Subscribe to ACCA’s Student Accountant Direct

Donate

If you have benefited from OpenTuition please donate.

ACCA CBE 2023 Exams

Instant Poll * How was your exam, and what was the result?

BT CBE exam was.. | MA CBE exam was..
FA CBE exam was.. | LW CBE exam was..

Specially for OpenTuition students

20% off BPP Books

Get BPP Discount Code

Latest comments

  • chimporera on CIMA P2 Chapter 11 Test
  • chimporera on CIMA P2 Chapter 13 Test
  • Chong on Conceptual Framework – ACCA SBR lecture
  • mariyaaa on Foreign exchange risk management (1) Part 4 – ACCA (AFM) lectures
  • John Moffat on Introduction to Financial Accounting – ACCA Financial Accounting (FA) lectures

Copyright © 2023 · Support · Contact · Advertising · OpenLicense · About · Sitemap · Comments · Log in


We use cookies to show you relevant advertising, find out more: Privacy Policy · Cookie Policy