lecture 30 chapter 07 cash task force image gallery clip art included in this electronic...
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Lecture 30Lecture 30
Chapter 07Chapter 07
CashCash
Task Force Image Gallery clip art included in this electronic presentation is used with the permission of NVTech Inc.
1. Describe the nature of cash and the importance of internal control over cash.
2. Summarize basic procedures for achieving internal control over cash receipts.
3. Summarize basic procedures for achieving internal control over cash payments, including the use of a voucher system.
4. Describe the nature of a bank account and its use in controlling cash.
5. Prepare a bank reconciliation
Control Over CashControl Over Cash Many companies need several cash accounts to
account for different cash categories and funds.
Most companies have multiple bank accounts. The title for each bank account should be: Cash in Bank—(Name of Bank)
Preventive controls protect cash from theft and misuse of cash.
Detective controls are designed to detect theft or misuse of cash and are also preventive in nature.
Cash Receipts
CASHIER’S DEPARTMENT
ACCOUNTINGDEPARTMENT
Register records
Mail Receipts
Remittance advices
1
ACCOUNTINGDEPARTMENT
Deposit ticket
Bank
CASHIER’S DEPARTMENT
Deposit receipt
1. The employee who opens the mail should initially compare the amount received with the amount on the remittance advice.
2. The employee opening the mail stamps checks and money orders “For Deposit Only” in the bank account of the business.
3. All cash is sent to the Cashier’s Department where checks and money orders are combined with receipts from cash sales and a bank deposit ticket is prepared.
4. The remittance advices and their summary totals are delivered to the Accounting Department where a clerk prepares the records of the transactions and posts them to the customer account.
5. The stamped duplicate copy of the deposit ticket is returned to the Accounting Department where a clerk compares the receipt with the total amount that should have been deposited.
1. Cash controls must provide assurance that payments are made for only authorized transactions.
2. Cash controls should ensure that cash is used efficiently.
3. A voucher system provides assurance that what is being paid for was properly ordered, received, and billed by the supplier.
Internal Control of Cash PaymentsInternal Control of Cash Payments
Basic Features of the Basic Features of the Voucher SystemVoucher System
• A voucher system normally uses vouchers.• The system normally has a file for unpaid
vouchers and a file for paid vouchers.• Usually prepared by the Accounting Department
after all necessary supporting documents are received (purchase order, supplier’s invoice, and a receiving report).
• In preparing the voucher, the accounts payable clerk verifies the quantity, price, and mathematical accuracy of the supporting documents and files the paid voucher.
1. Compare each deposit listed on the bank statement with unrecorded deposits appearing on the preceding period’s reconciliation and with deposit receipts.
2. Compare paid checks with outstanding cheques appearing on the preceding period’s reconciliation and with recorded checks.
3. Compare bank credit memorandums to entries in the journal.
4. Compare bank debit memorandums to entries recording cash payments.
5. List any errors discovered during the preceding steps.
BANK
Bank’s books
Beginning balanceRs. 3,359.78
Depositor’s records
Beginning balanceRs. 2,549.99
Power Network Inc. prepares to reconcile the monthly bank statement as of July 31, 2011
Power Network Inc. prepares to reconcile the monthly bank statement as of July 31, 2011
A deposit of Rs.816.20 did not appear on the bank statement.
A deposit of Rs.816.20 did not appear on the bank statement.
BANK
Bank’s books
Beginning balance Rs. 3,359.78Add deposit not
recorded by bank
816.20Rs.
4,175.98
Depositor’s records
Beginning balance Rs. 2,549.99
BANK
Bank’s books
Beginning balance Rs. 3,359.78Add deposit not
recorded by bank
816.20Rs. 4,175.98
Depositor’s records
Beginning balance Rs. 2,549.99
Add note and interest collected by bank
408.00Rs. 2,957.99
The bank collected a note in the amount of Rs.400 and the related
interest of Rs.8 for Power Networking
The bank collected a note in the amount of Rs.400 and the related
interest of Rs.8 for Power Networking
A deposit of $637.02 did not appear on the bank statement.
A deposit of $637.02 did not appear on the bank statement.
Three cheques that were written during the period did not appear on the bank statement: #812, Rs.1,061;
#878, Rs.435.39, #883, Rs.48.60.
Three cheques that were written during the period did not appear on the bank statement: #812, Rs.1,061;
#878, Rs.435.39, #883, Rs.48.60.
BANK
Bank’s books
Beginning balance Rs. 3,359.78Add deposit not
recorded by bank
816.20Deduct outstanding Cheques:
No. 812 1,061.00No. 878 435.39No. 883 48.60
1,544.99
Rs. 4,175.98
Depositor’s records
Beginning balance Rs. 2,549.99
Add note and interest collected by bank
408.00Rs. 2,957.99
BANK
Bank’s books
Deduct outstanding cheques:
No. 812 1,061.00No. 878 435.39No. 883 48.60
1,544.99
Depositor’s records
Deduct cheques returnedbecause of insufficientfunds Rs. 300.00
Beginning balance Rs. 3,359.78Add deposit not
recorded by bank
816.20Rs.
4,175.98
Beginning balance Rs. 2,549.99
Add note and interest collected by bank
408.00Rs. 2,957.99
The bank returned an NSF check from one of the firm’s customers, Thomas, in the amount of Rs. 300.
This was a payment on account.
The bank returned an NSF check from one of the firm’s customers, Thomas, in the amount of Rs. 300.
This was a payment on account.
Deduct outstanding cheques:
No. 812 1,061.00No. 878 435.39No. 883 48.60
1,544.99
Deduct cheque returnbecause of insufficientfunds Rs. 300.00
Bank service charges 18.00
BANK
Bank’s books
Beginning balance Rs. 3,359.78Add deposit not
recorded by bank
816.20Rs. 4,175.98
Depositor’s records
Beginning balance Rs. 2,549.99
Add note and interest collected by bank
408.00Rs. 2,957.99
The bank service charges totaled Rs.18.00.The bank service charges totaled Rs.18.00.
BANK
Bank’s books
Depositor’s records
Beginning balance Rs. 3,359.78Add deposit not
recorded by bank
816.20Deduct outstanding cheques:
No. 812 1,061.00No. 878 435.39No. 883 48.60
1,544.99
Rs. 4,175.98
Beginning balance Rs. 2,549.99
Add note and interest collected by bank
408.00Deduct cheques return
because of insufficientfunds Rs. 300.00
Bank service charges 18.00
Rs. 2,957.99
Error recording Cheque 879 9.00
Cheque No. 879 for Rs.732.26 to Taylor Co. on account, erroneously recorded in journal as Rs.723.26.
Cheque No. 879 for Rs.732.26 to Taylor Co. on account, erroneously recorded in journal as Rs.723.26.
327.00
BANK
Bank’s books
Beginning balance Rs. 3,359.78Add deposit not
recorded by bank
816.20Deduct outstanding cheque:
No. 812 1,061.00No. 878 435.39No. 883 48.60
1,544.99
Rs. 4,175.98
Adjusted balance Rs. 2,630.99
Depositor’s records
Beginning balance Rs. 2,549.99
Add note and interest collected by bank
408.00Deduct cheque return
because of insufficientfunds 300.00
Bank service charges 18.00
Rs. 2,957.99
Adjusted balance Rs. 2,630.99
Error recordingCheque No. 879 9.00 327
Power NetworkingBank Reconciliation
July 31, 2011
Balance per bank statement 3,359.78Add: Deposit not recorded by bank 816.20
4,175.98Deduct: Outstanding checks
No. 812 1,061.00No. 878 435.39No. 883 48.60 1,544.99
Adjusted balance 2,630.99
Balance per depositor’s records 2,549.99Add: Note and interest collected by bank 408.00
2,957.99Deduct: NSF check (Thomas ) returned 300.00
Bank service charges 18.00Error in recording Check No. 879 9.00 327.00
Adjusted balance 2,630.99
Lecture Overview
End of Lecture 30End of Lecture 30