CASH (IFRS + WARREN)

8/10/2019 CASH (IFRS + WARREN)

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Chapter 7

Cash

Accounting, 21stEdition

Warren Reeve Fess

Facilitator: Se Tin, S.E., M.Si, Ak

IFRS Edition

Kieso, Weygandt, and Warfield


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The accounting and reporting related

to cash is essentially the same under

both IFRS and U.S. GAAP.


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Cashon

The Statement ofFinancial Position


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Assets

Current assets:

Cash $119,500

Notes receivable 250,000Accounts receivable $445,000

Less allowance for

doubtful accounts 15,000 430,000

Interest receivable 14,500Merchandise inventory 714,000

Crabtree Co.Statement of Financial Position

December 31, 2006


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What is cash

Reporting cash

Control of Cash

Summary of cash-related items

Cash

Object ives


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Most liquid asset.

Standard medium of exchange.

Basis for measuring and accounting for all other items.

Current asset.

What is Cash?

Examples: coin, currency, available funds on deposit at thebank, money orders, certified checks, cashiers checks, personal

checks, bank drafts and savings accounts.


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A financial assetalso a financial instrument.

Financial Instrument - Any contract that gives rise to a

financial asset of one entity and a financial liability or

equity interest of another entity.

What is Cash?

Illustration 7-1Types of Assets


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Short-term, highly liquid investments that are both

Reporting Cash

(a) readily convertible to cash, and

(b) so near their maturity that they present insignificant risk

of changes in interest rates.

Examples:Treasury bills, commercial paper, and money market

funds.

Cash Equivalents


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When material in amount:

Segregate restricted cash from regular cash.

Current assets or non-current assets

Cash

Restricted Cash

Examples, restricted for: (1) plant expansion, (2) retirement of

long-term debt, and (3) compensating balances.


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When a company writes a check for more than the

amount in its cash account.

Cash

Bank Overdrafts

Generallyreported as a current liability.

Offset against cash account onlywhen available cash is

present in another account in the same bank on which

the overdraft occurred.


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What is internal control?

It is the organizational plan & all therelated measures that an entity adoptsto

safeguard assets, encourage adherence to company

policies,

promote operational efficiency, and...

ensure accurate and reliable accountingrecords.


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Establishing an EffectiveSystem of Internal Control

1 Competent, reliable, and ethical

personnel2Assignment of responsibilities

3 Proper authorization

4 Separation of duties


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Retailers Sources of Cash

CashReceipts

CASHIERS

DEPARTMENTACCOUNTINGDEPARTMENT

Register

records

Mail Receipts

Remittance

advices


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1

ACCOUNTINGDEPARTMENT

Deposit ticket

Bank

CASHIERS

DEPARTMENT

Deposit receipt

Retailers Sources of Cash


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1. Cash controls must provide assurance thatpayments 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, andbilledby the supplier.

Internal Control of Cash

Payments


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Bank reconciliation &

The related journal entries


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A bank reconci l iationis

a listing of the items and amountsthat cause the cash balance

reported in the bank statement to

differ from the balance of thecash account in the ledger.

Most companies have multiple bank accounts. The title

for each bank account should be: Cash in Bank(Name

of Bank)


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Reasons for Differences Between Depositors

Records and the Bank Statement

Outstanding checks

Deposits in transit

Service charges

Collections

Not-sufficient-funds (NSF)checks

Errors


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BANK

Banks

books

Beginning balance $3,359.78

Depositors

records


Power Network prepares to reconcile the

monthly bank statement as of July 31, 2006


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A deposit of $816.20 did not

appear on the bank statement.

BANK

Banks

books

Beginning balance $3,359.78Add deposit not

recorded by bank 816.20

$4,175.98

Depositors

records



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BANK

Banks

books



$4,175.98

Depositors

records


Add note and interestcollected by bank 408.00

$2,957.99

The bank collected a note in the

amount of $400 and the related

interest of $8 for Power Networking


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BANK

Banks

books

Deduct outstandingchecks:No. 812 $1,061.00No. 878 435.39No. 883 48.60 1,544.99

Depositors

records

Deduct check returnedbecause of insufficientfunds $300.00



$4,175.98



$2,957.99

The bank returned an NSF check from one of the

firms customers, Thomas Ivey, in the amount of

$300. This was a payment on account.


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Deduct check returnbecause of insufficientfunds $300.00

Bank service

charges 18.00

BANK

Banks

books



$4,175.98

Depositors

records



$2,957.99

The bank service charges totaled $18.00.


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BANK

Banks

books

Depositors

records




$4,175.98




Bank service

charges 18.00

$2,957.99

Error recordingCheck No. 879 9.00

Check No. 879 for $732.26 to Taylor Co. on account,

erroneously recorded in journal as $723.26.

327.00


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BANK

Banks

books




$4,175.98

Adjusted balance $2,630.99

Depositors

records




Bank service

charges 18.00

$2,957.99


Error recordingCheck No. 879 9.00 327


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Balance per bank statement $3,359.78

Add: Deposit not recorded by bank 816.20$4,175.98

Deduct: Outstanding checksNo. 812 $1,061.00No. 878 435.39No. 883 48.60 1,544.99


Balance per depositors records $2,549.99Add: Note and interest collected by bank 408.00

$2,957.99

Deduct: NSF check (Thomas Ivey) returned$300.00Bank service charges 18.00Error in recording Check No. 879 9.00 327.00


Power NetworkingBank Reconciliation

July 31, 2006


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Balance per depositors records $2,549.99Add: Note and interest collected by bank 408.00 $2,957.99

Deduct: NSF check (Thomas Ivey) returned $300.00Bank service charges 18.00Error in recording Check No. 879 9.00 327.00


Power Networking

Bank Reconciliation

July 31, 2006


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July 31 Cash 408 00

Notes Receivable 400 00

Interest Receivable 8 00

Entries Related to a Bank Reconciliation


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Balance per depositors records $2,549.99Add: Note and interest collected by bank 408.00 $2,957.99

Deduct: NSF check (Thomas Ivey) returned $300.00Bank service charges 18.00Error in recording Check No. 879 9.00 327.00


Power Networking

Bank Reconciliation

July 31, 2006


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Entries Related to a Bank Reconciliation

July 31 Cash 408 00

Notes Receivable 400 00

Interest Receivable 8 00

30 Accounts ReceivableThomas Ivey 300 00

Miscellaneous Administrative Exp. 18 00

Accounts PayableTaylor Co. 9 00

Cash 327 00


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Petty

Cash


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Aug. 1 Petty Cash 100 00

Cash 100 00

On August 1, issued Check No. 511 for $100

to established a petty cash fund.


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Aug. 31 Office Supplies 50 00

Cash 88 00

At the end of August, the petty cash receipts

indicated expenditures for the following items:

office supplies, $28, postage (office supplies),$22; store supplies, $35, and miscellaneous

administrative items, $3.

Store Supplies 35 00

Miscellaneous Administrative Exp. 3 00


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LO 2

Illustration 7-3

Summary of Cash-Related Items


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The End

Chapter 7


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Problem 7-13+ poin

tugas

Exercise 7-1

Problem 7-12

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