6 - 1 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater

Banking Procedures
and Control of Cash
Chapter 6
6 - 2 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
Internal Control of Cash
Separation and rotation of duties
Cash receipts deposited daily
Setting up a petty cash fund
All other payments made by check
Authorization required for activities
Checks and other documents prenumbered
6 - 3 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
Learning Objective 1
Depositing, writing, and endorsing
checks for a checking account.
6 - 4 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
Learning Unit 6-1
(Bank Procedures)
Signature card
Duplicate deposit tickets
ATM cards and personal identification
numbers are protected.
6 - 5 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
Learning Unit 6-1
(Bank Procedures)
It is the signing or stamping of ones name
on the back left-hand side on the check.
6 - 6 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
Learning Unit 6-1
(Bank Procedures)
Blank endorsement
Full endorsement
Restrictive endorsement
6 - 7 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
Learning Unit 6-1
(Bank Procedures)
A check is a written order.
The drawer is the one who writes the check.
The drawee is the one who pays
the money to the payee (bank).
Drawer Drawee Bank
6 - 8 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
Learning Unit 6-1
(Bank Procedures)
The payee is the one to
whom the check is payable.
Write checks properly to ensure that
amounts and payee cannot be changed.
6 - 9 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
Learning Unit 6-1
(Bank Procedures)
The bank reconciliation is the process that verifies
the business records cash balance, and
the bank statement ending cash balance.
6 - 10 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
Learning Unit 6-1
(Bank Procedures)
Items that cause differences between the
bank balance and the book balance.
A. Items recorded by the company but not yet
recorded by the bank:
Deposits in transit
Outstanding checks
6 - 11 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
Learning Unit 6-1
(Bank Procedures)
B. Items on a bank statement but not
recorded by the business:
Bank credits
Electronic funds transfers
Service charge
Interest revenue earned on account
NSF checks
Errors
6 - 12 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
Learning Objective 2
Reconciling a bank statement.
6 - 13 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
The Bank
Reconciliation Process
The bank statement of Debbie Wholesale Co.
shows a balance of $6,919 on April 30.
The balance of the Cash account on the
ledger has a balance of $7,330.
Paycheck for
Dep t. of Tre asure r
John Doe
Payc heck for
Date
Dep t. of Treasure r
Jane Doe
Date
6 - 14 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
The Bank
Reconciliation Process
1. The April 27 and 30 deposits of $500 and
$1,200 do not appear on the bank statement.
2. The bank charged $5 as service charges.
3. Two checks have not been paid by
the bank.
6 - 15 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
The Bank
Reconciliation Process
Check No. Amount
4 $ 594
5 700
Total $1,294
6 - 16 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
Balance per bank, April 30 $6,919
Add deposit in transit 1,700
$8,619
Less outstanding checks 1,294
Adjusted bank balance $7,325
The Bank
Reconciliation Process
6 - 17 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
Balance per books, April 30 $7,330
Deduct service charge 5
Adjusted book balance $7,325
The Bank
Reconciliation Process
Balance per books Balance per bank
These amounts are the same.
6 - 18 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
Learning Objectives
3 and 4
Establishing and replenishing
a petty cash fund; setting up
an auxiliary petty cash record.
Establishing and replenishing
a change fund.
6 - 19 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
Learning Unit 6-2 (The
Establishment of Petty Cash)
This is an account used for paying
small day-to-day expenses.
The only time petty cash is entered in the
journal is to establish the fund (or to
change the level of cash in the fund).
Expenses are debited and Cash
credited to replenish the fund.
6 - 20 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
Learning Unit 6-2 (The
Establishment of Petty Cash)
Debbie Wholesale Co.
General Journal Page 1
Date
Account Title
and Description PR Dr. Cr.
200x
May 1

Petty Cash
Cash
Establishment of fund

60


60
6 - 21 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
Learning Unit 6-2 (The
Establishment of Petty Cash)
Date Item Cost
2 Cleaning package $ 3.00
5 Postage stamps $ 9.00
8 First-aid supplies $15.00
9 Delivery expense $ 6.00
14 Delivery expense $15.00
27 Postage stamps $ 6.00
Total $54.00
Petty cash items documented
by vouchers for the May 200x:
6 - 22 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
Learning Unit 6-2 (The
Establishment of Petty Cash)
Debbie Wholesale Co.
General Journal Page 1
Date
Account Title
and Description PR Dr. Cr.
200x
May 31

Various Expenses
Cash
Replenishment of fund

54


54
6 - 23 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
Learning Objective 5
Handling transactions involving
cash short and over.
6 - 24 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
Learning Unit 6-2 (The
Establishment of Change Fund)
Debbie Wholesale Co.
General Journal Page 1
Date
Account Title
and Description PR Dr. Cr.
200x
Apr 1

Change Fund
Cash
Establish change fund

120


120
6 - 25 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
Cash Short and Over
If there is a shortage
Cash Short and Over is debited.
If there is an overage
Cash Short and Over is credited.
6 - 26 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
End of Chapter 6