Chap8 Class Notes 2010

Chap8 Class Notes 2010 - Chapter Eight Cash I. Cash and...

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Victor Leung 1 ACCT2111 2010 Chapter 8 Chapter Eight Cash I. Cash and Bank Account Cash consists of coins, currency, cheques, money orders, and money on hand or deposited in a bank. Use of a bank contributes significantly to good internal control: (1) Provide physical controls for the storage (2) Minimize the amount of cash kept on hand (3) Create a double record of all transactions: one by the business and one by the bank. A cheque is a written order signed by the depositor, directing the bank to pay a specified sum of money to a designated recipient. (1) the Maker (or drawer) is the one who issues out and signs the cheque (2) the Maker’s bank (or payer ) is the bank on which the money is drawn (3) the payee is the party to whom money is paid to. Remittance advice (Illustration 8-11, page 356) A bank statement shows: (Illustration 8-12, page 358) (1) cheques paid and other debits (e.g. charges and fee) that reduce the balance in the depositor’s account (2) deposits and other credits (e.g. interest income) that increase the balance in the depositor’s account (3) the balance after each day’s transactions. A credit memorandum (CM) may identify notes receivable or remittance (EFT) collected by the bank for the depositor. (1) Bank sends credit memoranda to its customers to inform them that the bank has credited to their accounts in the book of the bank. (2) Every deposit received by the bank from its customers is a credited to the customer’s account in the bank’s book and is a liability to the bank. A
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Chap8 Class Notes 2010 - Chapter Eight Cash I. Cash and...

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