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Chapter 11

Chapter 11. Cash Control and Banking. Cash. Lifeblood of any business Involved in many transactions Easy target for theft and fraud. Cash Control Procedures. Separation of duties Immediate listing of cash receipts Prenumbered sales slips Daily cash proof Daily deposit of cash

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Chapter 11

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  1. Chapter 11 Cash Control and Banking

  2. Cash • Lifeblood of any business • Involved in many transactions • Easy target for theft and fraud

  3. Cash Control Procedures • Separation of duties • Immediate listing of cash receipts • Prenumbered sales slips • Daily cash proof • Daily deposit of cash • Payment by cheque • Petty cash procedures • Periodic audit • Monthly bank reconciliations

  4. Cash Short or Over • Cash may not “balance” at the end of the day • If “short” Dr Cash 490 Dr Cash Short or Over 10 Cr Sales 500 • If “long” or extra cash Dr Cash 510 Cr Sales 500 Cr Cash Short or Over 10 * Where Cash Short or Over is an expense account

  5. Petty Cash • Many small transactions make cheques unworkable • Establish and maintain an in office “cash box” to cover small expenditures • Establish the fund: Dr Petty Cash 200 Cr Cash 200

  6. Petty Cash • Collect receipts or give out vouchers to be completed as proof • Replenish the fund: Dr Miscellaneous Expense 35 Dr Gas Expense 90 Dr Postage 45 Dr Office Expenses 20 Cr Cash 190 Replenish the petty cash fund

  7. Bank Reconciliation • Prepared monthly to determine the true amount of cash available • Compare bank statement with company cash account in ledger • Deduct from Bank balance all outstanding cheques • Add to Bank balance any late night deposit on statement date • Adjust our cash account for service charges and interest received or charged

  8. Bank Reconciliation

  9. Bank Reconciliation • Necessary journal entries: Dr Cash 5 Cr Interest Revenue 5 Dr Bank Charges 60 Cr Cash 60

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