Question

Why shouldn't you record a sale on a journal entry or directly on a bank deposit form?

Answer 1

Sales should be recorded through a journal entry, not directly on a bank deposit form, to ensure proper controls and accurate financial reporting, as well as to maintain a clear audit trail.

Step-by-step explanation:

You should not record a sale directly on a bank deposit form or in a journal entry simultaneously because it doesn't allow for proper accounting controls and can lead to errors in financial reporting. Recording sales accurately requires acknowledging them in a journal entry as part of the accounting cycle, which allows for a thorough verification process through the creation of an invoice, receipt of payment, and eventual bank deposit. Recording a sale without these steps can create issues with reconciliation, audit trails, and financial accuracy.

As for the hypothetical Singleton Bank scenario, it illustrates bank transactions from a balance sheet perspective where deposits are listed as liabilities and loans as assets, highlighting the importance of accurate bookkeeping in the banking industry.

Answer 2

Recording a sale directly on a bank deposit form or in a journal entry is inappropriate because it overlooks the proper accounting process, which requires entries in the sales journal and accounts receivable ledger.

Explanation:

In accounting, transactions must follow the principles of accuracy, completeness, and proper documentation. A sale constitutes a crucial financial event that needs accurate recording to reflect the economic reality of the business. Directly recording a sale on a bank deposit form or in a journal entry bypasses the essential steps of double-entry bookkeeping.

Sales need to be accurately recorded in the sales journal to maintain an organized record of all sales transactions. Simultaneously, the corresponding entry should be made in the accounts receivable ledger, documenting the amount the customer owes. This process ensures a clear audit trail and enables tracking of customer debts owed to the company.

Recording sales solely on a bank deposit form or in a journal entry without proper documentation in the sales journal and accounts receivable ledger can lead to errors, misstatements, and difficulties in tracing transactions. It also hampers the ability to generate accurate financial statements, impacting decision-making processes and the overall financial health assessment of the company.

Therefore, following the established accounting procedures of recording sales in the sales journal and accounts receivable ledger is crucial. This ensures accurate and transparent financial reporting, compliance with accounting standards, and provides a comprehensive view of a company's financial activities.