cash float copy
TRANSCRIPT
CASH FLOAT
Prepared ByMr. Binu Jose
MBA 4th Semester, MACFAST College
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CONTENTS
• Concept of Cash Float• Different types or components of
float
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What is Float?
• Bankers define floats as cash obligation that are in the process of collection.
• In simple words, Float is the difference between the cash balance appear in the passbook and that appear in the firm’s book.
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Components/Types of FloatFLOAT – Difference between cash and bank records on account of non clearing of cheques.
NEGATIVE FLOAT - Related to Bills Receivable
POSITIVE FLOAT – Related to Bills Payable.
Collection Float• Invoicing Float•Mail Float• Processing Float•Collection Float
Disbursement /Payment Float•Mail Float• Processing Float•Collection Float
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Negative Float-Collection Float• It occurs when the firm receive payments.• It is undesirable for a firm and it should be
minimized.• Collection float is the time which elapses between
the time a payer deduct a payment from its accounts ledger and the time when the payee actually receives the funds in actual form.
Collection Float = Invoicing Float + Mail Float+ Processing Float+ Clearing Float
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Four types of Collection Float1.Invoicing Float • Invoicing float is the time it takes for a firm to
bill receivables.
The efficiency of the company’s internal
accounting and billing procedures
The efficiency of the company’s internal
accounting and billing procedures
Effect of Invoicing
Float
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2. Mail Float Mail Float is the time the firm’s bill spends in the
mail on its way to the customer and the time the customer’s cheque spend in the mail on its way to the firm.
Firm Customer
Bill
Cheque
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3.Processing Float When the firm’s office get the cheque and if
the office machinery is lax, the cheque is deposited with the bank not on the same day but the next day.
It is the time between a firm’s receipt of a payment and its deposit of the cheque for collection
It is the time between a firm’s receipt of a payment and its deposit of the cheque for collection
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4. Clearing Float
• It is the time from when the bank accept a cheque for deposit to when it makes the funds available in the firms account
Bank Firm
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Collection Float
Customer Mail the cheque
Company receive the cheque
Company deposits the cheque
Bank process and clear the cheque
Mail Float
Processing Float
Clearing Float
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Positive Float- Disbursement /payment Float• Positive Float occurs when the firm makes the
payment• It allow the firm to maintain a control over the cash
for a long period of time. Disbursement Float is the time between when a firm
writes a cheque on available bank account fund and when the bank deduct the corresponding amount from the bank balance.
Firm –Issue Cheque
Supplier- Cash Credited to his bank account
Delay in Time for disbursement of
cash
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Disbursement/Payment Float
Company Mail the cheque to Supplier
Supplier receive the cheque
Bank process and credits Supplier's
account
Supplier deposits the cheque
Mail Float
Processing Float
Clearing Float
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Net Float• Difference between Payment Float and
Receipt Float
Net Float= Disbursement Float - Collection Float
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Thank you!
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