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The term Bookkeeping means different things to different people:-
- Some people think that bookkeeping is the same as accounting.
- Others see bookkeeping as limited to recording transactions in journals or daybooks and then posting the amounts into accounts in ledgers. After the amounts are posted, the bookkeeping has ended.
- At mid-size and larger corporations the term bookkeeping might be absent. They keep track of transactions by collecting notes, receipts, invoices etc.
However, Bookkeeping is one of the components of accounting. Think of accounting as the mom and bookkeeping as one of her children. It is the process of recording and classifying business financial transactions. In simple words - maintaining the records of the financial activities of a business or an individual. Bookkeeping's objective is simply to record and summarize financial transactions into a usable form that provides financial information about a business or an individual. It is concerned with ensuring that records of those individual financial transactions are accurate, up-to-date and comprehensive.
Two common bookkeeping systems used by businesses and other organizations are the single-entry bookkeeping system and the double-entry bookkeeping system. Single-entry bookkeeping uses only income and expense accounts, recorded primarily in a revenue and expense journal. Single-entry bookkeeping is adequate for many small businesses. Double-entry bookkeeping requires recording each transaction twice, using debits and credits.
A) Single-entry System: The single entry system is a bookkeeping system where a user of this system makes only one entry to enter a business financial transaction. It generally includes a daily summary of cash receipts and a monthly record of receipts and disbursements. It got its name because it record each transaction only once as either revenue or as an expense. Since each entry is recorded only once, debits and credits are not used to record a financial event. The drawback of this system is that it does not provide a business with all the financial information needed to adequately report the financial affairs of a business.
B) Double-entry System: The double entry system is the standard system used by businesses and other organizations to record financial transactions. It is based upon the fact that every transaction has two parts and therefore affects two ledger accounts. Since all business transactions consist of an exchange of one thing for another, double entry bookkeeping using debits and credits, is used to show this two-fold effect. The double entry system also has built-in checks and balances. Due to the use of debits and credits, the double-entry system is self-balancing. The total of the debit values recorded must equal the total of the credit values recorded. This system, when used along with the accrual method of accounting, is a complete accounting system and focuses on the income statement and balance sheet. This system has worldwide support as the system to use by businesses for recording their financial transactions. It got its name because each transaction is recorded in at least two ledgers using debits and credits.
"Ignore GST for this question.
You are required to:
1. Prepare a Cash Flow Statement for the year ended 30 June 2019 in a form consistent with AASB 107.
2. Prepare a Reconciliation of Net Profit with Net Cash Flows from Operating Activities.
I have supplied a acceptable format but cant work it all out. please show workings to help me"
The following summary of transactions of Henry & Henry is provided for the year ended 30 June 2019
Credit sales of legal services 2,52,000 x
Credit purchases 1,91,000 x
Cash sales of legal services 2,93,000 x
Cash purchases 1,38,000 x
Discounts allowed 3,000
Discounts received 3,000
Increase in accounts receivable 11,000 x
Increase in accounts payable 5,000 x
Bad debts written off 2,000 x
Increase in allowance for Doubtful Debts 2,000
Repayment of bank loan 18,000 x
Drawings by Partners 15,000 x
Purchase of new Fittings 25,000 x
Alterations to buildings 4,000 x
Depreciation of plant 34,000
Cash expenses paid 1,05,000 x
Net profit for the year 73,000
Cash at bank 01/07/2018 75,000 x
Cash at bank 30/6/19 1,16,000 x
question 1
Statement of Cash Flows for Henry & Henry for the year ending 30 June 2019
cash flows from operating activities:
Receipts from customers (252000+293000-11000-2000) 5,32,000
Interest received
Payments to suppliers (105000+191000+138000-5000)-4,29,000
Payments to employees
Net cash from (used in) operating activities 1,03,000
Cash flows from investing activities:
Proceeds from sale of property, plant & equipment
Payment for property, plant & equipment (25000+4000) -29,000
Net cash from (used in) investing activities -29,000
Cash flows from financing activities:
Capital contributions
Proceeds from borrowings
Repayment of borrowings -18,000
Drawings -15,000
Net cash from (used in) financing activities -33,000
Net increase(decrease) in cash and cash equivalents 41,000
Cash and cash equivalents at beginning of period 75,000
Cash and cash equivalents at end of period 1,16,000
question 2
Reconciliation of Net cash from Operating Activities to Net Profit
Nett Profit 73,000
Add or Deduct
Non cash Items
Depreciation
Doubtful debts
Changes in current assets and current liabilities
Net Cash From operating Activities
