Cash Chapter 7 1 Financial Accounting Fifth Edition

Cash Chapter 7 -1 Financial Accounting, Fifth Edition

Control Features: Use of a Bank Contributes to good internal control over cash. Minimizes the amount of currency on hand. Creates a double record of bank transactions. Bank reconciliation. Chapter 7 -2

Control Features: Use of a Bank Statements Debit Memorandum Bank service charge NSF (not sufficient funds) Credit Memorandum Collect notes receivable. Interest earned. Chapter 7 -3 Illustration 7 -7

Control Features: Use of a Bank Review Question 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. Chapter 7 -4

Control Features: Use of a Bank Reconciling the Bank Account Reconcile balance per books and balance per bank to their adjusted (corrected) cash balances. Reconciling Items: 1. Deposits in transit. 2. Outstanding checks. Time Lags 3. Bank memoranda. 4. Errors. Chapter 7 -5 SO 5 Prepare a bank reconciliation.

Control Features: Use of a Bank Reconciliation Procedures Illustration 7 -8 + Deposit in Transit + Notes collected by bank - - NSF (bounced) checks - Check printing or other service charges Outstanding Checks +/- Bank Errors +/- Book Errors CORRECT BALANCE Chapter 7 -6 CORRECT BALANCE SO 5 Prepare a bank reconciliation.

Control Features: Use of a Bank Advertising expense Chapter 7 -7 SO 5 Prepare a bank reconciliation.

Control Features: Use of a Bank Illustration: Prepare a bank reconciliation at April 30. Cash balance per bank statement Add: Deposit in transit Less: Outstanding checks Adjusted cash balance per bank Cash balance per books Add: Collection of notes receivable Error in check No. 443 Less: NSF check Bank service charge Adjusted cash balance per books Chapter 7 -8 $15, 907. 45 2, 201. 40 (5, 904. 00) $12, 204. 85 $11, 589. 45 1, 035. 00 36. 00 (425. 60) (30. 00) $12, 204. 85 SO 5 Prepare a bank reconciliation.

Control Features: Use of a Bank Illustration: Journalize the adjusting entries at April 30 on the books of Laird Company. Apr. 30 Dr. 615. 40 45. 00 Cash Bank fee expense Accounts receivable Notes receivable Interest revenue Advertising expense Chapter 7 -9 Cr. 425. 60 1, 000. 00 50. 00 36. 00 SO 5 Prepare a bank reconciliation.

Control Features: Use of a Bank Review Question The reconciling item in a bank reconciliation that will result in an adjusting entry by the depositor is: a. outstanding checks. b. deposit in transit. c. a bank error. d. bank service charges. Chapter 7 -10 SO 5 Prepare a bank reconciliation.