Question

You are employed as a bookkeeper for a new business. As part of the set-up you have been asked to create procedures for each aspect of the business’s cash accounting system. The procedures are designed to ensure each aspect of the accounting system is used in a consistent manner. Each procedure should be approximately 1 page long. You will need to create procedures for: Chart of Accounts numbering. Verifying source documents. Processing receipts. Processing payments. Petty cash processing. Processing credit card transactions. Processing credit card payments. Reconciling bank statements.

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Answer 1

As a bookkeeper we should be able to understand the transaction of a business. below are the components of chart of accounts.

Description    GL Codes

Assets	100000 to 199999
Liabilities	200000 to 299999
Retained earnings	300000 to 399999
Revenues	400000 to 499999
Expenses	500000 to 899999
Suspense	900000 to 999999

Here the concept is Assets consists of current and non current assets. For example Cash account GL number is 100000 and bank GL is 100500 debtors GL is 100300, vendors GL is 200300 and revenue GL is 400000.

Note: As per the chart of accounts each account have unique GL code.

Verifying source documents:

Source documents can be any legal valid proof per a transaction. examples are vouchers, invoices, Indents, quotations, Challans and purchase orders etc. Before passing any general entry to our books of accounts we should have proper backup such as sourcing documents.

How do we verify a sourcing document?

In case of purchase or sale we check the invoice copy by referring to invoice date, amount, material type, quantity and all the terms and conditions. It also includes the tax portions and vendor GST/VAT/CIN numbers.

Processing Receipts:

Receipts arises from a sale or from loan or in the of capital. If the receipts arises from a sale. Sale may be a cash sale or credit sale.

Cash sale we get the immediate cash receipts so we will the invoice amount and post the entry as below. assume sale value as $550.

Cash GL a/c (100000) DR $550

Revenue or sales a/c (400000) CR $550

In case of credit sales, usually debtors have the eligibility of credit period once it crossed debtors make payment to us, it will come to our bank account from their we apply cash to our debtors accounts.

entry would be: assume same amount $550

Bank alc (100500) DR $550

Debtors a/c (100300) CR $550

Processing Payments:

Payments maybe a any vendor payments or expenses incurred any subscription fees or any loan installments. We may forgot to make payment on due date to few of the transaction for that we can use APP. APP is nothing but automatic payment program which pull the invoices which are due by this week or month. So that we can make payment on time. It is automatic program linked to our company bank account.

Entry: assume payment of $800

Vendor a/c (200300) DR $800

Bank a/c (100500) CR $800

Processing of Petty cash: Petty cash is nothing but having some funds to make daily payments which are tea bills, water bills, daily conveyance to wagers. We usually put some less amount in this account once month end comes we check how much balance leftover and will put remaining amount to carry forward the balance to next month petty expenses.