Cash accounting for a service business

Question 1

what is a service business?

Answer 1

-A business that earns income by providing time, labour, assets, or expertise.
-Most transactions are cash-based.

Question 2

whats cash?

Answer 2

Includes notes, coins, cheques, credit card payments, and bank account balances.

Question 3

how are cash reciepts verified?

Answer 3

Verified using receipts, EFT rolls, or bank statements.

Question 4

how are cash payments verified?

Answer 4

Verified using EFT vouchers and bank statements. Recorded in: Cash Receipts Journal, Cash Payments Journal, Summarised in Statement of Receipts and Payments

Question 5

whats single entry accounting?

Answer 5

Recording transactions in journals.
Summarised data used to prepare reports.

Question 6

what are statements of receipts and payments?

Answer 6

Lists all cash inflows and outflows, and shows: Opening and closing bank balances, Change in bank balance during the period

Question 7

whats a cashflow statement?

Answer 7

Reports all cash flows during a period:
Operating: Day-to-day business activities
Investing: Buying or selling non-current assets
Financing: Loans, capital, or drawings
Helps with planning and decision-making

Question 8

provide a GST overview

Answer 8

GST Payable (Liability): GST on fees collected from customers.
GST Receivable (Asset): GST paid to suppliers.
If GST collected ➜ GST liability ➜ GST settlement
If GST paid ➜ GST asset ➜ GST refund

Question 9

whats cashflow cover?

Answer 9

A liquidity indicator that measures if the business can meet short-term debts with its operating cash flow.
Cash Flow Cover = Net Cash Flow from Operations ÷ Average Current Liabilities