What do you credit if there is no bank account?

System

Hey all,

I had an exam this week where a company doesn't have a bank account. Where would you post items which usually go to the bank account? e.g. if a supplier sells the company something and we haven't set up a credit account for them so we will be paying the supplier by cheque on delivery. I know that you would debit VAT and purchases, but where would the credit be if there is no bank account? :-s

The company also doesn't have a petty cash account. There is a column in the cash book titled 'petty cash' though. Which account would you post the total of this column to when you do the postings?

I don't really understand why a company wouldn't have a bank account or petty cash book, does anyone know?

Thanks if anyone can help me!!

xxx

System

Re:What do you credit if there is no bank account?

Hang on, are you sure here?

If the company is making or receiving payments by cheque then it must have a bank account. Besides, there is a difference between a physical bank account as in the type you find on the street and the bank account as in the type we use to record receipts and payments. You would still need the latter in your accounting records even if you were stashing the money under your mattress...

If there is no physical, high street bank account, you should still have the CBR - cash book received - and the CBP - cash book payments - in your manual accounts system, the latter of which would be used in your example for the credit entry.

If the business deals in the folding stuff and banks it under the mattress, it may not need a petty cash book since it has physical cash to hand, however it does still need accounting for.

Regards,

Robert