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CHAPTER 7 CASH CLASS DISCUSSION QUESTIONS 1. Many transactions affect cash, and it is the asset most susceptible to improper diver- sion and use because of its high value in relation to its mass and its ease of transfer among parties. For these reasons, the con- trol of cash often warrants special attention. 2. a. Cash Short and Over b. Cash shortages are debited to this ac- count. 3. Other income section 4. The three documents supporting the liabil- ity are vendor’s invoice, purchase order, and receiving report. The invoice should be compared with the receiving report to de- termine that the items billed have been re- ceived and with the purchase order to verify quantities, prices, and terms. 5. A voucher is recorded after it has been ap- proved for payment. 6. The prenumbering of checks and the pay- ing of all obligations by check are desirable elements of internal control. The funda- mental weakness in internal control is the failure to separate the responsibility for the maintenance of the accounting records (bookkeeping) from the responsibility for operations (payment of obligations). 7. a. In the unpaid voucher file, the vouchers should be filed by the due dates so that each voucher can be paid when due. b. In the paid voucher file, the vouchers should be filed in numerical order so that they can be easily located when needed. 8. The Cash balance and the bank statement balance are likely to differ because of (1) a delay by bank or depositor in recording transactions (such as checks or deposits) or (2) errors by bank or depositor in recording transactions. 9. The purpose of a bank reconciliation is to determine the reasons for the difference between the balance according to the de- positor’s records and the balance accord- ing to the bank statement, and to correct those items representing errors in recording that may have been made by the bank or by the depositor. 10. Additions made by the bank to the deposit- or’s balance 11. Accounts Receivable should be debited and Cash should be credited. 12. Payments of small amounts by check often result in delay, annoyance, and excessive expense of maintaining records and pro- cessing the payments. For these reasons, small cash payments are made from a petty cash fund. 13. a. Petty Cash b. Various expense and asset accounts as indicated by a summary of expendit- ures 14. The fund should be replenished as of the last day of the period. It is the simplest means of recording the $690 of expendit- ures in the appropriate accounts and restoring the amount of the petty cash to the amount shown in the ledger account. 15. Cash and cash equivalents are usually re- ported as one amount in the Current Assets section of the balance sheet.
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This note was uploaded on 01/15/2012 for the course ACC 305 taught by Professor Williams during the Spring '11 term at University of Phoenix.

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