2 companies usually invest idle cash in cash

Info icon This preview shows pages 8–13. Sign up to view the full content.

View Full Document Right Arrow Icon
2. Companies usually invest idle cash in cash equivalents to earn a higher return on these assets. 3. Effective cash management applies the following five principles: a.Encourages collection of receivables. b.Delays payment of liabilities. c.Keeps only necessary levels of assets. d.Plans expenditures. 8-8
Image of page 8

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

View Full Document Right Arrow Icon
Chapter 08 - Cash and Internal Controls e.Invests any excess cash. 8-9
Image of page 9
Chapter 08 - Cash and Internal Controls Exercise 8-5 (20 minutes) 1. Sept. 9 Petty Cash ........................................................ 400 Cash ............................................................ 400 To establish a petty cash fund. 2. Sept. 30 Merchandise Inventory* ................................... 32 Postage Expenses ........................................... 113 Miscellaneous Expenses ................................. 87 Cash Short and Over ....................................... 2 Cash ............................................................ 234 To reimburse the petty cash fund. * Transportation-in costs are included in the Merchandise Inventory account under a perpetual system. 3. Oct. 1 Cash .................................................................. 100 Petty Cash .................................................. 100 To decrease the petty cash fund. Exercise 8-6 (20 minutes) 1. Jan. 1 Petty Cash ........................................................ 200 Cash ............................................................ 200 To establish a petty cash fund. 2. Jan. 8 Postage Expense ............................................. 64 Merchandise Inventory* ................................... 19 Delivery Expense ............................................. 36 Miscellaneous Expense ................................... 53 Cash ............................................................ 172 To reimburse the petty cash fund. * Transportation-in costs are included in Merchandise Inventory under a perpetual system. 8-10
Image of page 10

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

View Full Document Right Arrow Icon
Chapter 08 - Cash and Internal Controls Exercise 8-6 (Concluded) 3. Jan. 8 Postage Expense .......................................... 64 Merchandise Inventory ................................ 19 Delivery Expense .......................................... 36 Miscellaneous Expense ............................... 53 Cash ........................................................ 172 To reimburse the petty cash fund. Petty Cash ..................................................... 300 Cash ........................................................ 300 To increase the petty cash fund. Exercise 8-7 (20 minutes) Bank Balance Book Balance Not Shown on Add Deduct Add Deduct Adjust Reconciliation 1. Bank service charge. x Cr. 2. Checks written and mailed to payees on October 2. x 3. Check written by another depositor but charged against this company's account. x 4. Principal and interest on note receivable to this company is collected by the bank but not recorded by the company. x Dr. 5. Special bank charge for collection of note in No. 4 on company's behalf. x Cr. 6. Check written against the company account and cleared by the bank; erroneously not recorded by the company recordkeeper. x Cr. 7. Interest earned on the account. x Dr. 8. Deposit made on September 30 after the bank closed. x 9. Checks outstanding on August 31 that cleared the bank in September. x 10. NSF check from customer returned on Sept. 25 but not recorded by this company. x Cr. 11. Checks written by the company and mailed to payees on September 30. x 12. Deposit made on September 5 and processed by bank on September 6. x 8-11
Image of page 11
Chapter 08 - Cash and Internal Controls Exercise 8-8 (10 minutes) 1. The voucher system of control establishes procedures for: (a) Verifying, approving, and recording obligations for eventual cash disbursements, and (b) Issuing checks for payment of verified, approved, and recorded obligations. 2. All expenditures should be overseen by a voucher system of control (not only the purchase of merchandise). 3. The voucher is initially prepared by the accounting department when it receives the purchase requisition from the department making the request or when it receives reliable evidence that an obligation has been incurred.
Image of page 12

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

View Full Document Right Arrow Icon
Image of page 13
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern