Download - Chapter 8-1 Chapter 8 Fraud, Internal Control and Cash Accounting Principles, Ninth Edition
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Chapter 8-1
Chapter 8
Fraud, Internal
Control and Cash
Accounting Principles, Ninth Edition
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Chapter 8-2
Petty Cash Fund - Used to pay small amounts.
Involves:
1. establishing the fund,
2. making payments from the fund, and
3. replenishing the fund.
Cash ControlsCash ControlsCash ControlsCash Controls
SO 5 Describe the operation of a petty cash fund.SO 5 Describe the operation of a petty cash fund.
Cash Disbursements ControlsCash Disbursements Controls
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Chapter 8-3
Illustration: If Laird Company decides to establish a $100 fund on March 1, the journal entry is:
Cash ControlsCash ControlsCash ControlsCash Controls
SO 5 Describe the operation of a petty cash fund.SO 5 Describe the operation of a petty cash fund.
Petty cash 100Mar. 1
Cash 100
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Chapter 8-4
Illustration: Assume that on March 15 Laird’s petty cash custodian requests a check for $87. The fund contains $13 cash and petty cash receipts for postage $44, freight-out $38, and miscellaneous expenses $5. The general journal entry to record the check is:
Cash ControlsCash ControlsCash ControlsCash Controls
SO 5 Describe the operation of a petty cash fund.SO 5 Describe the operation of a petty cash fund.
Postage expense 44Mar. 15
Cash 87
Freight-out 38
Miscellaneous expense 5
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Chapter 8-5
Illustration: Occasionally, the company may need to recognize a cash shortage or overage. Assume that Laird’s petty cash custodian has only $12 in cash in the fund plus the receipts as listed. The request for reimbursement would, therefore, be for $88, and Laird would make the following entry:
Cash ControlsCash ControlsCash ControlsCash Controls
SO 5 Describe the operation of a petty cash fund.SO 5 Describe the operation of a petty cash fund.
Postage expense 44Mar. 15
Cash 88
Freight-out 38
Miscellaneous expense 5
Cash over and short 1
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Chapter 8-6
Contributes to good internal control over cash.
Minimizes the amount of currency on hand.
Creates a double record of bank transactions.
Bank reconciliation.
Control Features: Use of a BankControl Features: Use of a BankControl Features: Use of a BankControl Features: Use of a Bank
SO 6 Indicate the control features of a bank account.SO 6 Indicate the control features of a bank account.
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Chapter 8-7
Making Bank DepositsAuthorized employee should make deposit.
SO 6 Indicate the control features of a bank account.SO 6 Indicate the control features of a bank account.
Bank Code
Numbers
Front Side Reverse Side
Illustration 8-8
Control Features: Use of a BankControl Features: Use of a BankControl Features: Use of a BankControl Features: Use of a Bank
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Chapter 8-8
Writing ChecksWritten order signed by depositor directing bank to pay a specified sum of money to a designated recipient.
SO 6 Indicate the control features of a bank account.SO 6 Indicate the control features of a bank account.
Maker
Payee
Illustration 8-9
Payer
Control Features: Use of a BankControl Features: Use of a BankControl Features: Use of a BankControl Features: Use of a Bank
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Chapter 8-9
Bank Statements
Debit Memorandum
Bank service charge
NSF (not sufficient funds)
SO 6 Indicate the control features of a bank account.SO 6 Indicate the control features of a bank account.
Illustration 8-10
Credit Memorandum
Collect notes receivable.
Interest earned.
Control Features: Use of a BankControl Features: Use of a BankControl Features: Use of a BankControl Features: Use of a Bank
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Chapter 8-10
The control features of a bank account do not include:
a. having bank auditors verify the correctness of the bank balance per books.
b. minimizing the amount of cash that must be kept on hand.
c. providing a double record of all bank transactions.
d. safeguarding cash by using a bank as a depository.
Review QuestionReview Question
SO 6 Indicate the control features of a bank account.SO 6 Indicate the control features of a bank account.
Control Features: Use of a BankControl Features: Use of a BankControl Features: Use of a BankControl Features: Use of a Bank