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Controls cash controls cash disbursements controls

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Unformatted text preview: SO 4 Explain the applications of internal control SO principles to cash disbursements. principles Control Features: Use of a Bank Control Features: Use of a Bank Contributes to good internal control over cash. Creates a double record of bank transactions. 7-30 Minimizes the amount of currency on hand. Bank reconciliation. Control Features: Use of a Bank Control Features: Use of a Bank Bank Statements Debit Memorandum Bank service charge NSF (not sufficient funds) Credit Memorandum 7-31 Collect notes receivable. Interest earned. Illustration 7-7 Control Features: Use of a Bank Control Features: Use of a Bank Review Question The control features of a bank account do not include: a. having bank auditors verify the correctness of the bank balance per books. b. minimizing the amount of cash that must be kept on hand. c. providing a double record of all bank transactions. d. safeguarding cash by using a bank as a depository. 7-32 Control Features: Use of a Bank Control Features: Use of a Bank Reconciling the Bank Account Reconcile balance per books and balance per bank to their adjusted (corrected) cash balances. Reconciling Items: 1. Deposits in transit. 2. Outstanding checks. Time Lags 3. Bank memoranda. 4. Errors. 7-33 SO 5 Prepare a bank reconciliation. Control Features: Use of a Bank Control Features: Use of a Bank Reconciliation Procedures Illustration 7-8 + Deposit in Transit + Notes collected by bank - - NSF (bounced) checks - Check printing or other service charges Outstanding Checks +/- Bank Errors +/- Book Errors CORRECT BALANCE 7-34 CORRECT BALANCE SO 5 Prepare a bank reconciliation. Control Features: Use of a Bank Control Features: Use of a Bank 7-35 SO 5 Prepare a bank reconciliation. Control Features: Use of a Bank Control Features: Use of a Bank Illustration: Prepare a bank reconciliation at April 30. Illustration: Cash balance per bank statement Deposit in transit Outstanding checks Adjusted cash balance per bank Cash balance per books Error in check No. 443 NSF check Bank service charge Collection of notes receivable Adjusted cash balance per books 7-36 $15,907.45 2,201.40 (5,904.00) $12,204.85 $11,589.45 36.00 (425.60) (30.00) 1,035.00 $12,204.85 SO 5 Prepare a bank reconciliation. Control Features: Use of a Bank Control Features: Use of a Bank Illustration: Journalize the adjusting entries at April 30 on the books of Laird Company. Dr. Apr. 30 Cash Bank fee expense Accounts receivable Cr. 615.40 45.00 425.60 Notes receivable Interest revenue 50.00 Accounts payable 7-37 1,000.00 36.00 SO 5 Prepare a bank reconciliation. Control Features: Use of a Bank Control Features: Use of a Bank Review Question The reconciling item in a bank reconciliation that will result in an adjusting entry by the depositor is: a. outstanding checks. b. deposit in transit. c. a bank error. d. bank service charges. 7-38 SO 5 Prepare a bank reconciliation. Control Features: Use of a Bank Control Features: Use of a Bank Electronic Funds Transfers (EFT) 7-39 Disbur...
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