chapter 8-1 chapter 8 internal control and cash. chapter 8-2 cash controls cash consists of coins,...
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Chapter 8-1
CHAPTER CHAPTER 88
INTERNAL INTERNAL CONTROLCONTROLAND CASHAND CASH
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Chapter 8-2
Cash ControlsCash ControlsCash ControlsCash Controls
Cash consists of coins, currency, checks, money orders, and money on hand or on deposit in a bank.
Cash receipts come from:
cash sales
collections on account from customers
receipt of interest, rent, and dividends
investments by owners
bank loans
proceeds from the sale of noncurrent assetsLO 3 Explain the applications of internal control principles to cash LO 3 Explain the applications of internal control principles to cash
receipts.receipts.
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Chapter 8-3
Contributes to good internal control over cash.
Minimizes the amount of currency on hand.
Creates a double record of bank transactions.
Bank reconciliation.
Use of a BankUse of a BankUse of a BankUse of a Bank
LO 6 Indicate the control features of a bank account.LO 6 Indicate the control features of a bank account.
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Chapter 8-4
Writing ChecksWritten order signed by depositor directing bank to pay a specified sum of money to a designated recipient.
Use of a BankUse of a BankUse of a BankUse of a Bank
LO 6 Indicate the control features of a bank account.LO 6 Indicate the control features of a bank account.
Maker
Payee
Illustration 8-11
Payer
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Chapter 8-5
Bank Statements
Debit Memorandum
Bank service charge
NSF (not sufficient funds –bounced check)
Use of a BankUse of a BankUse of a BankUse of a Bank
LO 6 Indicate the control features of a bank account.LO 6 Indicate the control features of a bank account.
Illustration 8-12
Credit Memorandum
Collect notes receivable.
Interest earned.
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Chapter 8-6
Reconciling ItemsReconciling Items
Bank Statement BalanceBank Statement Balance DeductDeduct: Outstanding : Outstanding
checks.checks. AddAdd: Deposits in transit.: Deposits in transit. AddAdd or or DeductDeduct: Bank : Bank
errors.errors.
Bank Statement BalanceBank Statement Balance DeductDeduct: Outstanding : Outstanding
checks.checks. AddAdd: Deposits in transit.: Deposits in transit. AddAdd or or DeductDeduct: Bank : Bank
errors.errors.
Book BalanceBook Balance DeductDeduct: Nonsufficient : Nonsufficient
funds check (NSF).funds check (NSF). DeductDeduct: Bank service : Bank service
charge.charge. AddAdd: Interest earned on : Interest earned on
checking account.checking account. AddAdd: Collections made by : Collections made by
the bank.the bank. AddAdd or or DeductDeduct: :
Book errors. Book errors.
Book BalanceBook Balance DeductDeduct: Nonsufficient : Nonsufficient
funds check (NSF).funds check (NSF). DeductDeduct: Bank service : Bank service
charge.charge. AddAdd: Interest earned on : Interest earned on
checking account.checking account. AddAdd: Collections made by : Collections made by
the bank.the bank. AddAdd or or DeductDeduct: :
Book errors. Book errors.
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Chapter 8-7
Reconciliation Procedures
Use of a BankUse of a BankUse of a BankUse of a Bank
LO 7 Prepare a bank reconciliation.LO 7 Prepare a bank reconciliation.
+ Deposit in Transit
- Outstanding Checks
+- Bank Errors
+ Notes collected by bank
- NSF (bounced) checks
- Check printing or other service charges
+- Book Errors
CORRECT BALANCE CORRECT BALANCE
Illustration 8-13
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Chapter 8-8
E8-11E8-11 The following information pertains to Family Video Company.
1. Cash balance per bank, July 31, $7,263.
2. Cash balance per books, July 31, $7,284.
3. July bank service charge not recorded by the depositor $28.
4. Deposits in transit, July 31, $1,500.
5. Bank collected $900 note for Family in July, plus interest $36, less fee $20.The collection has not been recorded by Family, and no interest has been accrued.
6. Outstanding checks, July 31, $591.
Instructions
a) Prepare a bank reconciliation at July 31.
b) Journalize the adjusting entries at July 31 on the books of Family Video Company.
Use of a BankUse of a BankUse of a BankUse of a Bank
LO 7 Prepare a bank reconciliation.LO 7 Prepare a bank reconciliation.
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Chapter 8-9
E8-11 E8-11 a) Prepare a bank reconciliation at July 31.
Use of a BankUse of a BankUse of a BankUse of a Bank
LO 7 Prepare a bank reconciliation.LO 7 Prepare a bank reconciliation.
Cash balance per bank statement $7,263
Add: Deposit in transit 1,500
Less: Outstanding checks (591)Adjusted cash balance per bank $8,172
Cash balance per books $7,284
Add: Collection of notes receivable 900
Collection of interest 36
Less: Bank service charge (28)
Note collection fee (20)
Adjusted cash balance per books $8,172
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Chapter 8-10
Cash 888July 31
Bank charge expense 28
Miscellaneous expense 20
Notes receivable
900Interest revenue
36
Use of a BankUse of a BankUse of a BankUse of a Bank
LO 7 Prepare a bank reconciliation.LO 7 Prepare a bank reconciliation.
E8-11 E8-11 b) Journalize the adjusting entries at July 31 on the books of Family Video Company.
Note: Note: Adjusting journal entry includes only the adjustments to the cash balance per books.
Dr. Cr.