510chapter7fall2009afterclass10292009

510chapter7fall2009afterclass10292009 - Chapter 7: Cash and...

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Chapter 7: Cash and Chapter 7: Cash and Receivables Receivables    
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Since cash is the most liquid asset, internal control of cash is imperative. Controls must prevent unauthorized use of cash. Management must have necessary information for proper use of cash. Management and Control of Cash Management and Control of Cash
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Cash Controls Bank Reconciliation Cash in ledger Cash indicated on bank statement Which is correct???
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Bank Reconciliation Books (GL amount)         Bank statement ( end of period ) Plus:   Receipts Plus: Notes collected  Deposits in transit                            Interest earned Errors Errors Less:   Disbursements         Less: NSF checks                       Outstanding Checks Service charges                  Errors Bank fees                      Errors **End Balance of cash     **End Balance of Cash **The above figures should agree = “True” Cash
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P7-13 The cash account of Aguilar Co. showed a ledger balance of $3,969.85 on June 30, 2010. The bank statement as of that date showed a balance of $4,150. Upon comparing the statement with the cash records, the following facts were determined. 1. There were bank service charges for June of $25 2. A bank memo stated that Bao Dai’s note for $1,200 and interest of $36 had been collected on June 29, and the bank had made a charge of $5.50 on the collection. (No entry had been made on the books when bank received note) 3. Receipts for June 30 for $3,390 were not deposited until July 2. 4. Checks outstanding on June 30 totaled $2,136.05. 5. The bank had charged the account for a customers uncollectible check amounting to $253.20 on June 29. 6. A customer’s check for $90 had been entered as $60 in the cash receipts journal on June 15. 7. Check no. 742 in the amount of $491 had been entered in the cash book as $419, and check no. 747 in the amount of $58.20 had been entered as $582. Both checks had been issued to pay for purchases of equipment.
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P7-13 Balance per bank $4,150 Add: Deposits in transit 2,890 Undeposited receipts Bank errors that understate the bank statement balance Deduct: Outstanding checks (2136.05) Bank errors that overstate the bank statement balance Balance $4,903.95
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P7-13 (cont’d) Balance per books 3,969.85 Add: Bank credits and collections 936.00 Book errors that understate book balance 30.00 Book errors that understate book balance 523.80 Deduct: Bank charges (30.50) Book errors that overstate balance (72.00) NSF check (453.20) Balance 4,903.95
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Receivables Written promises to pay a sum of money on a specified future date. Claims held against customers and others
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This note was uploaded on 12/29/2009 for the course ACC 5100 taught by Professor Andrews during the Fall '09 term at Wayne State University.

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510chapter7fall2009afterclass10292009 - Chapter 7: Cash and...

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