chapter6notes

chapter6notes - $xx Record journal entries for everything...

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CASH AND INTERNAL CONTROL I. A. Cash Cash on Hand + Cash in Banks + Undelivered Checks B. Cash Equivalents Short-term, highly liquid investments Must be: 1. Readily convertible into known amount of cash 2. So near maturity that interest rate changes won't affect their market value. Examples of Cash Equivalents: II. CASH CONTROLS
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A. Control of Cash Receipts 1. Record when received 2. Deposit receipts intact 3. Separation of duties B. Control of Cash Disbursements 1. All major disbursements made by check 2. Pay only small, misc. expenditures from Petty Cash 3. Prepare Bank Reconciliation C. BANK RECONCILIATION Reconciles timing differences and errors Balance Per Bank: $xx Balance Per Books: $xx Add: Deposits in transit Add: Notes collected Bank errors Interest collected Book errors Less: Outstanding Checks Less: NSF Checks Bank errors Service Charges Overdraft Charges book errors True Cash Balance $xx True Cash Balance
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Unformatted text preview: $xx Record journal entries for everything on book side! **Debit memo = bank reduces your cash account Credit memo = bank increases your cash acct. Example: The following refers to Ginger's Floral Shop: a. Prepare a bank reconciliation showing the "true" cash balance for July 31 given the following information: 1. Balance per bank statement at July 31 st , $4,610. 2. Balance per books at July 31, $3,900. 3. Deposits in transit not recorded by bank, $445. 4. Bank error, check drawn by the Ginger Bread Shop debited to account of Ginger's Floral Shop, $20. 5. Note collected by bank, $1,025. 6. Debit memorandum for bank charges, $10. 7. N.S.F. check returned by bank, $35. 8. Accountants credited cash account for $175 rather than the correct figure of $100 in recording check #55. 9. Outstanding checks of $120 on July 31. b. Prepare the adjusting or correcting entries required....
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This note was uploaded on 03/27/2008 for the course ACCT 229 taught by Professor Strawser during the Fall '06 term at Texas A&M.

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chapter6notes - $xx Record journal entries for everything...

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