Post on 19-Dec-2015
transcript
© 2010 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 11e by Slater
Banking Procedure and Banking Procedure and Control of CashControl of Cash
Chapter 6
Learning Objective 1Learning Objective 1
Depositing, writing, and endorsing checks for a checking account
© 2010 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 11e by Slater
LO-1
Internal ControlInternal ControlSystem of procedures and
methods to control a firm’s assets as well as monitor its operations
© 2010 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 11e by Slater
LO-1
Internal Control ExamplesInternal Control ExamplesResponsibilities and duties of
employees are dividedAll cash receipts are deposited
into the bank on a daily basisAll cash payments are made by
checkEmployees are rotatedAll checks are authorized for
payment© 2010 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 11e by Slater
LO-1
Internal Control ExamplesInternal Control ExamplesAt time of payment, all invoices
or documents are stamped “paid”All checks are pre-numberedThe monthly bank statement is
sent to and reconciled by someone other than the employees who handle, record, and/or deposit cash
© 2010 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 11e by Slater
LO-1
Checking Account: Getting Checking Account: Getting StartedStartedSignature Card - verifies the
authenticity of the signature on all checks
Deposit Slip - form used when making deposits◦Lists each check individually◦Lists total amount of currency, coins &
checks being depositedDebit Card - carries MasterCard/Visa
logo◦Use anywhere MasterCard/Visa are accepted◦Amount of purchase is deducted directly
from the checking account© 2010 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 11e by Slater
LO-1
Checking Account: Check Checking Account: Check EndorsementEndorsementEndorsement – signing or
stamping of one’s name on back side of check
Payee has transferred the right to deposit or cash the check to someone else
© 2010 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 11e by Slater
LO-1
Checking Account: Check Checking Account: Check EndorsementEndorsementTypes
◦Blank endorsement – does not specify that a particular entity must endorse it
◦Full endorsement – entity signing the back of the check indicates the name of the entity to whom the check is to be paid
◦Restrictive endorsement – stamped for deposit only
© 2010 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 11e by Slater
LO-1
Checking Account: Checking Account: CheckbookCheckbookCheck – written order signed by drawer instructing a drawee to pay specific sum of money to payee
Cancelled Checks - have been processed by the bank and are no longer negotiable
© 2010 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 11e by Slater
LO-1
Learning Objective 2Learning Objective 2Reconciling a bank statement
© 2010 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 11e by Slater
LO-2
Bank ReconciliationBank ReconciliationProcess of reconciling the
checkbook balance with the bank balance given on the bank statement◦Deposits in transit◦Outstanding checks◦Service charges◦Nonsufficient funds
© 2010 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 11e by Slater
LO-2
Bank ReconciliationBank Reconciliation
Checkbook balance
Add:
Deduct: (Service Charges, NSF Checks)
Reconciled balance
Bank balanceAdd: Deposits in
Transit
Deduct: Outstanding Checks
Reconciled balance
© 2010 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 11e by Slater
LO-2
Exercise 6-1Exercise 6-1
Bank balance $1200Add: Deposits in transit 900
$2,100Deduct: Outstanding checks 678
Reconciled balance $1,422
© 2010 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 11e by Slater
LO-2
Exercise 6-1Exercise 6-1
Checkbook balance $1,500Deduct: Bank service charge 40
NSF check 38Reconciled balance $1,422
© 2010 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 11e by Slater
LO-2
Exercise 6-1Exercise 6-1
Bank balance $1200
Add: Deposits in transit 900 $2,100
Deduct: Outstanding checks
678
Reconciled balance
$1,422
Checkbook balance $1,500
Deduct: Bank service charge 40 NSF check 38
Reconciled balance
$1,422
© 2010 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 11e by Slater
LO-2
Learning Objective 3Learning Objective 3
Establishing and replenishing a petty cash fund; setting up an auxiliary petty cash record
© 2010 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 11e by Slater
LO-3
Petty Cash FundPetty Cash FundAccount dedicated to paying
small day-to-day expensesAsset account, normal debit
balanceCustodian – oversees the fund
© 2010 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 11e by Slater
LO-3
Petty Cash VouchersPetty Cash VouchersPetty Cash Vouchers
◦Filled out each time a payment is made from petty cash fund
◦Sequentially numberedContains:
-Voucher # -2 signatures-Date -Account to be charged -Amount -Reason -Person/Company to whom payment is made
© 2010 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 11e by Slater
LO-3
Establish Petty Cash FundEstablish Petty Cash Fund
© 2010 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 11e by Slater
General Journal
Page 8
Date Account Titles and Description PR Dr. Cr.
May 1 Petty Cash 100
Cash 100
Petty Cash
LO-3
Establish a petty cash fund
Making PaymentsMaking Payments
© 2010 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 11e by Slater
Petty Cash Voucher No. 15
Date: _________________ Amount: ________________Paid to: _______________For: ___________________
Approved by: ____________Payment received by: _____________
Debit Account No.: _________
Sept. 6, 200X $10.83Foster’s Office Supply
Office Supplies
Sharon KahlCarol Miller
Office Supplies Expense – Account No. 615
615
LO-3
Making PaymentsMaking Payments
© 2010 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 11e by Slater
LO-3
Auxiliary Petty Cash Auxiliary Petty Cash RecordRecordSupplementary record for
summarizing petty cash information
Not required, but is helpful part of petty cash system
© 2010 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 11e by Slater
LO-3
Replenish Petty CashReplenish Petty CashUsing information on vouchers,
record expenses in journalA new check is cashed for total
amount of expensesCash is placed in petty cash box
© 2010 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 11e by Slater
LO-3
Replenish Petty Cash FundReplenish Petty Cash Fund
© 2010 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 11e by Slater
General Journal
Page 8
Date Account Titles and Description PR Dr. Cr.
25
30
15
70
May 31 Postage Expense
Supplies Expense
Miscellaneous Expense
Cash
LO-3
Replenish petty cash fund
Exercise 6-2Exercise 6-2
© 2010 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 11e by Slater
General JournalDate Account Titles and
DescriptionPR Dr. Cr.
July 1 Petty Cash Fund 100
Cash 100
To establish the fund
LO-3
Exercise 6-2Exercise 6-2
© 2010 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 11e by Slater
General JournalDate Account Titles and
DescriptionPR Dr. Cr.
July 31 Donations Expense 20
Postage Expense 18
Office Supplies Expense 25
Miscellaneous Expense 25
Cash 88
To replenish petty cash
fundLO-3
Learning Objective 4Learning Objective 4
Establishing and replenishing a change fund
© 2010 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 11e by Slater
LO-4
Change FundChange Fund
Fund made up of various denominations that are used to make change for customers
Remains the same amount one business day to the next
© 2010 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 11e by Slater
Date Account Titles and Description
PR Dr. Cr.
120
120
May 1 Change Fund
Cash LO-4Establish change fund
Learning Objective 5 Learning Objective 5
Handling transactions involving cash short and over
© 2010 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 11e by Slater
LO-5
Cash Short and OverCash Short and OverAccount that records cash
shortages and overagesIf ending balance is a debit –
recorded on income statement as miscellaneous expense
If ending balance is a credit – recorded on income statement as miscellaneous revenue
© 2010 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 11e by Slater
LO-5
Cash Short and OverCash Short and Over
If there is a cash shortage:
© 2010 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 11e by Slater
General Journal
Date Account Titles and Description
PR Dr. Cr.
500
50
Sales 550
Record sales and
shortage
May 13 Cash
Cash Short and Over
LO-5
Cash Short and OverCash Short and OverIf there is a cash overage:
© 2010 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 11e by Slater
General Journal
Date Account Titles and Description
PR Dr. Cr.
Record sales and
May 13 Cash 600
Cash Short and Over 50
Sales 550
LO-5
overage
Exercise 6-5Exercise 6-5
© 2010 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 11e by Slater
General Journal
Date Account Titles and Description PR Dr. Cr.
Record sales and
May 13 Cash 1,126
Cash Short and Over 74
Sales 1,200
LO-5
shortage
Exercise 6-3Exercise 6-3
© 2010 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 11e by Slater
General JournalDate Account Titles and Description PR Dr. Cr.
July 31
Donations Expense 20
Postage Expense 18
Office Supplies Expense 25
Miscellaneous Expense 25
Cash Short and Over 1
Cash 89
Replenish petty cash
LO-5
Exercise 6-4Exercise 6-4
© 2010 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 11e by Slater
LO-5
General Journal
Date Account Titles and Description PR Dr. Cr.
July 31 Donations Expense 20
Postage Expense 18
Office Supplies Expense 25
Miscellaneous Expense 25
Cash Short and Over 1
Cash 87
Replenish petty cash