Chapter 6 - 7-11Chapter 6Payment for Goods and Services:...

Info iconThis preview shows pages 1–8. Sign up to view the full content.

View Full Document Right Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: 7-11Chapter 6Payment for Goods and Services: Cash and Accounts Receivable2Receiving Payment For Goods And ServicesCash (includes checks): control is the biggest issueCredit: accounts receivableBad debts7-23Safeguarding CashSeparation of dutiesDifferent people receive and disburse the cash.Procedures for the record keeping of cash receipts and disbursements are separate.Handling the cash and record keeping are completely separate.4ProceduresUse pre-numbered checks, and keep a log of electronic transfers.Payment approval, check signing, and electronic funds transfer should be assigned to different individuals.** Bank accounts and cash balances should be reconciled monthly. **7-35Controls over CashPre-numberedDocumentsothersSeparate approvalfor purchases and approval for paymentsCheckSignaturesBankReconciliationMandatoryVacationDaily Deposits6Part I. Bank Reconciliation 7-47“ Usually, the ending balance as shown on the bankstatement does not agree withthe ending cash balance shown by the related Cash ledger account on the booksof the company.”8Bank Reconciliation1. Serve as an internal control tool2. Provides information for reconciling journal entries.Explains the difference between cash reported on bank statement and cash balance on company’s books.7-59TerminologyBank statementMonthly report prepared by bankthat contains details of a company’s deposits, disbursements, and bank charges.Bank reconciliationReport prepared by the companyafter receiving the bank statement that compares the bank statement with the company’s recordsto verify the accuracy of both.10Cash (Bank) Reconciliation Has Two “Independent” Parts-- Outstanding checks++ Deposits in transit+/- Bank errorsTrue cash balance-- NSF checks (from customers)++ Collections for us made by the bank -- Service charges++ Interest earned+/- Book errorsTrue cash balanceBalance per bankBalance per books7-611More Terminology Outstanding check A check written by the company that has been recorded on the company’s records but has not yet cleared the bankDeposit in transitA deposit that the company has made and recorded, but it has not reached the bank’s record keeping system yet.12More TerminologyNSF (Not Sufficient Fund) checkA “bad” check written by a customer that must be deducted from the company’s records. The company recorded the check as a cash receipt (and then deposited it), but the check writer didn’t have the money in his or her account to cover it. The bank will have already deducted it from the company’s balance (in the bank’s records), but the company will have to make an adjustment to their records.7-713More TerminologyOther additions An addition to the company’s balance in the bank’s records for a reason such as 1)...
View Full Document

This note was uploaded on 09/18/2010 for the course BUSS 152 taught by Professor Choiwooseok during the Fall '10 term at Korea University.

Page1 / 24

Chapter 6 - 7-11Chapter 6Payment for Goods and Services:...

This preview shows document pages 1 - 8. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online