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Hello,
Could you please help me.
From BPP study text 2014-2015
I have 2 questions.I’m almost sure that I found few mistakes there but just to be sure:Show the transactions by means of journal entries:
1) Collected and paid in takings $600
BPP answer is:
Dr Cash at bank
Cr Sales account – $600
Comment: Cash takings
In my opinion, it should be:
Dr Cash at bank
Cr AR – because if it’s a taking we should have recorded it already with Dr AR / Cr Sales?2) Gave Mrs Sullivan a perm, highlights etc on credit $80
Dr TAR – $80
Cr Sales – $80
Comment: The provision of a hair-do in credit
The comment is what am I worried about .I’ve searched about provision and it says it’s a liability of an entity or sth as backup for future loses.In this case I think it’s not a liability there’s nothing about future loses as well.So, is this wrong?Could you please explain what ” Provision” is?
Thanks in advance1 The word ‘takings’ implies that they have sold the good for cash – not on credit. (If they had been sold on credit then what you say would have been correct, but then we wouldn’t have used the word takings).
2 This is an English problem 🙁
In general terms we say we provide something when we give something. So ‘the provision of a haircut’ means that they gave someone a haircut.
In accountancy it has a different meaning (what you have typed).
It is wrong really for BPP to use the word here – I don’t think the examiner is likely to use it in this sense.
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