internal cash control

7/31/2019 Internal Cash Control

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Petty Cashier

Petty Cashier

Operating a Petty Cash Fund


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Petty Cashier

34

Stamps Courier



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Petty Cashier

34

Stamps Courier


Receipts


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Petty Cashier

Receipts

Treasurer andAccountant

GENERAL JOURNAL Page 4Date Description PR Debit Credit

May 15 Postage Expense 45

Courier Expense 80

Cash 125

$125

To reimbursepetty cash fund

We use a CashOver and Short

account if needed.



7/22

Petty Cash Example

Tension Co. maintains a petty cash fund of $400. Thefollowing summary information was taken from petty

cash vouchers for July:

Travel Expenses $79.30

Customer Business Lunches 93.42

Express Mail Postage 55.00

Miscellaneous Office Supplies 32.48

Lets look at replenishing the fund if the balance on July31 was $137.80.


8/22

Petty Cash Example

What amount of cash will be required toreplenish the petty cash fund?

a. $260.20

b. $262.20

c. $139.80

d. $137.80


9/22

Petty Cash Example

What amount of cash will be required toreplenish the petty cash fund?

a. $260.20

b. $262.20

c. $139.80

d. $137.80

Desired Balance 400.00$

Actual Balance 137.80

Amount Needed 262.20$


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Petty Cash Example


Jul 31 Travel Expense 79.30

Entertainment Expense 93.42

Postage Expense 55.00

Office Supplies Expense 32.48

Cash Over and Short 2.00

Cash 262.20

Lets make the journal entry to replenish the petty cash fund.


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Bank Reconciliation

A bank reconciliation is prepared periodically to explainthe difference between cash reported on the bank

statement and the cash balance on companys books.

GENERAL LEDGER

Account: Cash Acct. No. 102Balance

Date Item PR Debit Credit DR (CR)

May 31 Balance 2,481.18

Why are thebalances different?*


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Reconciling Items

Bank Statement Balance

Deduct: Outstandingchecks.

Add: Deposits in

transit.Add orDeduct: Bank

errors.

Book Balance

Deduct:Nonsufficient fundscheck (NSF).

Deduct: Bank servicecharge.

Add: Interest earnedon checking account.

Add: Collectionsmade by the bank.

Add orDeduct:Book errors.


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Bank Reconciliation

Two sections:Reconcile bank statement balance to the adjusted

bank balance.

Reconcile book balance to the adjusted book

balance.

The adjusted balances should be equal.


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Bank Reconciliation Example

Lets prepare a July 31 bank reconciliationstatement for the Simmons Company. The

July 31 bank statement indicated a balance of

$9,610, while the cash general ledger accounton that date shows a balance of$7,430.

Additional information necessary for the

reconciliation is shown on the next screen.


15/22

Outstanding checks totaled $2,417.

A $500 check mailed to the bank for deposit had notreached the bank at the statement date.

The bank returned a customers NSF check for $225

received as payment on account receivable.The bank statement showed $30 interest earned

during July.

Check No. 781 for supplies expense cleared the bank

for $268 but was erroneously recorded in our booksas $240.

A $486 deposit by Acme Company was erroneouslycredited to our account by the bank.



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Bank Balance, July 31 9,610$

Add: Deposit in Transit 500

Less: Bank Error 486$

Outstanding Checks 2,417 (2,903)Adjusted Balance, July 31 7,207$

Simmons CompanyBank Reconciliation

July 31, 2002


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Recording Adjusting Entries from

Bank Reconciliation

Only amounts shown on the book portion of thereconciliation require an adjusting entry.


Jul 31 Cash 30

Interest Revenue 30

To record interest earned in July


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Bank Reconciliation


Jul 31 Supplies Expense 28

Accounts Receivable 225

Cash 253

To adjust cash account

Only amounts shown on the book portion of thereconciliation require an adjusting entry.


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Bank Reconciliation

After posting the reconciling entries the cashaccount looks like this . . .

GENERAL LEDGER

Account: Cash Acct. No. 101

Balance

Date Item PR Debit Credit DR (CR)

Jul 31 Balance 7,430

31 Adjusting entry 30 7,460

31 Adjusting entry 253 7,207

Adjusted balance on July 31.


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Days Sales Uncollected

Days

SalesUncollected

Accounts ReceivableNet Sales 365=

How much time is likely to pass beforewe receive cash receipts from credit sales.


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internal cash control

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