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Cash

Cash. 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. Control Features: Use of a Bank. Illustration 7-7.

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Cash

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  1. Cash Financial Accounting, Fifth Edition

  2. 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.

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

  4. Control Features: Use of a Bank Review Question The control features of a bank account do not include: • having bank auditors verify the correctness of the bank balance per books. • minimizing the amount of cash that must be kept on hand. • providing a double record of all bank transactions. • safeguarding cash by using a bank as a depository.

  5. 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: • Deposits in transit. • Outstanding checks. • Bank memoranda. • Errors. Time Lags SO 5 Prepare a bank reconciliation.

  6. Control Features: Use of a Bank Reconciliation Procedures Illustration 7-8 + 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 SO 5 Prepare a bank reconciliation.

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

  8. Control Features: Use of a Bank Illustration: Prepare a bank reconciliation at April 30. Cash balance per bank statement $15,907.45 Add: Deposit in transit 2,201.40 Less: Outstanding checks (5,904.00) Adjusted cash balance per bank$12,204.85 Cash balance per books $11,589.45 Add: Collection of notes receivable 1,035.00 Error in check No. 443 36.00 Less: NSF check (425.60) Bank service charge (30.00) Adjusted cash balance per books$12,204.85 SO 5 Prepare a bank reconciliation.

  9. Control Features: Use of a Bank Illustration: Journalize the adjusting entries at April 30 on the books of Laird Company. Dr. Cr. Apr. 30 Cash 615.40 Bank fee expense 45.00 Accounts receivable 425.60 Notes receivable 1,000.00 Interest revenue 50.00 Advertising expense 36.00 SO 5 Prepare a bank reconciliation.

  10. 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. SO 5 Prepare a bank reconciliation.

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