Cash Beginning Balance Cash Sales Disbursements Collections -Other Receipts Ending Balance
Cash Beginning Balance Cash Sales Disbursements Collections -Other Receipts Ending Balance
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
What are the four accounts that are typically affected by cash transactions. Please use the following illustration to help you answer this question.
Transcribed Image Text:The diagram presents a flowchart illustrating the movement of financial transactions within a business, including sales revenue, accounts receivable, cash, interest revenue, and various expenses. Here is a detailed explanation of the flowchart:
1. **Sales Revenue**:
- Cash sales are directly linked to the Cash account.
2. **Accounts Receivable**:
- Collections of receivables are transferred to the Cash account.
3. **Cash**:
- Includes Beginning Balance, Cash Sales, Collections, and Other Receipts, all contributing to the cash inflow.
- Disbursements represent cash outflow and are deducted from the cash account.
- The Cash account also shows the Ending Balance after accounting for inflows and outflows.
4. **Interest Revenue**:
- Interest Revenue contributes to the Cash inflow and is shown as a separate component.
5. **Various Expenses**:
- Money for Various Expenses and Interest Expense is drawn from the Cash account and shown under expenses, contributing to the outflows.
This flowchart is designed to provide an overview of how financial transactions affect different accounts within a business, depicting inflows and outflows for better financial management.
Expert Solution
Step 1
Cash is the asset for the company. The normal balance is the debit balance of cash account. It shows that the accounts posted on the debit side of the cash account would be added to the cash balance. Whereas, the accounts posted on the credit side of the cash account would be deducted from the cash balance.
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