AC12 ch6

Where are we headed?
After completing this chapter, you should be able to:
• define the term ‘cash’
• explain the operation of a single-entry system to account for cash
• list the source documents used to verify cash transactions • calculate and classify a GST balance • record transactions in cash journals, including GST

• prepare a Statement of
Receipts and Payments
• record a GST settlement and a
GST refund in the cash journals.

CHAPTER 6

CASH ACCOUNTING
FOR SERVICE
BUSINESSES
KEY TERMS
After completing this chapter, you should be familiar with the following terms:
• service business

• cash surplus

• journal

• cash deficit

• Statement of Receipts and Payments

• GST payable

• single-entry accounting

• GST receivable

• Cash Receipts Journal

• GST refund.

• GST settlement

• Cash Payments Journal

© Anthony SImmons, Richard Hardy 2012
Cambridge University Press
ISBN 978-1-107-65709-0
Photocopying is restricted under law and this material must not be transferred to another party.

CAMBRIDGE VCE ACCOUNTING

86

6.1

Service business a small business that operates by providing its time, labour or expertise
(or a combination of all three) in return for a fee or charge UNITS 1&2

SERVICE BUSINESSES AND CASH

In Chapter 3 we considered how a small business can be classified according to the nature of its operations as a service business, trading business or manufacturing business.
In that chapter, a service business was defined as one that provides its time, labour or expertise in return for some kind of fee. This would include small businesses run by plumbers, motor mechanics, editors, hairdressers and architects, just to name a few.

Cash recording
The majority of the transactions of service businesses like these will be conducted using cash, so it is important that the accounting system is able to generate information relating to the firm’s cash position. Specifically, the information should cover the firm’s:
• cash receipts – the