CHAPTER 9 CASH. Chapter 9. Copyright 2012 The McGraw-Hill Companies, Inc. All rights reserved.

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H&R Block worked with the IRS to file the first electronic tax returns in 1986, 22,000 in all. In 2006, over 72 million tax returns were filed electronically.

The company’s 90,000 tax professionals have an average of five years experience and more than 300 hours of training.

In 2007 H&R Block generated $4.0 billion in revenues.

Answers will vary, but should recognize the need to weigh the earning power (interest income) and the need for liquidity (access to the cash).

These questions are designed to check students’ understanding of new terms, concepts, and procedures presented in the chapter.

1. Access to checkbook is restricted; use of prenumbered check forms; checks examined by someone who did not prepare them before they are signed; bank statement reconciled by someone other than employees who handle cash.

2. To record items that have not yet been entered in firm’s records.

3. Outstanding checks, deposits in transit, service charges.

4. Balance of Cash account in the general ledger.

5. To reconcile any difference between depositor’s checkbook, Cash account, and bank statement.

6. Day-by-day checking account activity, as well as beginning and ending balances.

7. Date, amount, payee, current balance, purpose of check. Stub should be prepared before the check so that it will not be forgotten.

8. Signed, authorized written order instructing a bank to pay a specific sum of money to a designated person.

9. Electronic processing of documents.

10. Restrictive endorsement.

Discussion Questions

CHAPTER 9

CASH

Chapter Opener: Thinking Critically

Office expenditures may include petty cash disbursements for office supplies and postage. Cash expenditures might also include payments for rent and utilities. Receipts might include cash sales for services or payments for services on account.

Fast Facts

Managerial Implications: Thinking Critically

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Chapter 9 Copyright © 2012 The McGraw-Hill Companies, Inc. All rights reserved.

personnel; checks prepared and recorded in the checkbook or check register by someone different from the person who approves the payments; use prenumbered checks.

16. Employees are investigated by an insurance company, and, if their backgrounds are satisfactory, their employer is insured against losses that may occur because of employee theft or mishandling of funds.

17. Only approved employees can handle cash; keep cash in locked location; record cash receipts as they arrive;

check funds against receipt log before bank deposits are made; make deposits promptly; separation of cash deposits, recording, reconciliation duties.

18. See Glossary for terms and definitions.

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EXERCISE 9.1

PAGE 1

1 2013 1

2 Apr. 29 Cash 1 5 0 4 00 2

3 Cash Short and Over 6 00 3

4 Sales 1 5 1 0 00 4

5 Record sales and cash shortage 5

6 6

7 30 Cash 1 4 2 2 00 7

8 Cash Short and Over 2 00 8

9 Sales 1 4 2 0 00 9

10 Record sales and cash overage 10

11 11

EXERCISE 9.2

PAGE 1

1 2013 1

2 Jan. 2 Petty Cash Fund 3 5 0 00 2

3 Cash 3 5 0 00 3

4 Establish Petty Cash Fund, Check No. 2108 4

5 5

EXERCISE 9.3

PAGE 3

1 2013 1

2 Jan. 31 Supplies 4 8 00 2

DESCRIPTION Post

Ref.

DEBIT CREDIT

GENERAL JOURNAL

DATE DESCRIPTION Post

Ref.

DEBIT

GENERAL JOURNAL

CREDIT

DATE

GENERAL JOURNAL

CREDIT

DATE DESCRIPTION Post

Ref.

DEBIT

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Chapter 9 Copyright © 2012 The McGraw-Hill Companies, Inc. All rights reserved.

Balance on bank statement 14 7 0 0 00

Additions:

Deposit in transit 8 5 7 00

15 5 5 7 00

Deductions for outstanding checks:

Check 7017 1 2 4 00

Check 7098 5 5 00

Check 7107 1 5 6 0 00

Total outstanding checks 1 7 3 9 00

Adjusted bank balance 13 8 1 8 00

Balance in books 14 2 6 2 00

Deductions:

Bank service charge 2 0 00

NSF check 4 2 4 00 4 4 4 00

Adjusted book balance 13 8 1 8 00

Chin Corporation Bank Reconciliation Statement

October 31, 2013

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EXERCISE 9.4 (continued)

PAGE

1 2013 1

2 Oct. 31 Miscellaneous Expense 2 0 00 2

3 Cash 2 0 00 3

4 Bank service charge for October 4

5 5

6 31 Accounts Receivable/James Dear 4 2 4 00 6

7 Cash 4 2 4 00 7

8 To record NSF check returned by bank 8

9 9

EXERCISE 9.5

Bank Balance Book Balance

1. X

2. X

3. X

4. X

5. X

6. X

7. X

X

Accounting Entry

X X X

GENERAL JOURNAL 14

DATE DESCRIPTION Post

Ref.

DEBIT CREDIT

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Chapter 9 Copyright © 2012 The McGraw-Hill Companies, Inc. All rights reserved.

Balance on bank statement 68 0 0 5 00

Additions:

Deposit in transit 3 7 0 0 00

Check incorrectly charged 2 4 8 00 3 9 4 8 00

71 9 5 3 00 Deductions for outstanding checks:

Check 3782 2 2 0 0 00

Check 3840 1 5 1 00

Total outstanding checks 2 3 5 1 00

Adjusted bank balance 69 6 0 2 00

Balance in books 69 4 8 7 00

Additions:

Noninterest-bearing note collected by bank 6 3 0 0 00

75 7 8 7 00 Deductions:

Bank collection fee for note 5 0 00

NSF check 6 1 3 5 00 6 1 8 5 00

Adjusted book balance 69 6 0 2 00

Cantu Office Supply Company Bank Reconciliation Statement

March 31, 2013

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EXERCISE 9.6 (continued)

PAGE 8

1 2013 1

2 March 31 Cash 6 3 0 0 00 2

3 Notes Receivable 6 3 0 0 00 3

4 To record receipt of note collected by bank 4

5 5

6 31 Miscellaneous Expense 5 0 00 6

7 Cash 5 0 00 7

8 To record bank collection fee 8

9 9

10 31 Accounts Receivable/Wilson Construction Company 6 1 3 5 00 10

11 Cash 6 1 3 5 00 11

12 To record NSF check returned by bank 12

13 13

DEBIT CREDIT

GENERAL JOURNAL

DATE DESCRIPTION Post

Ref.

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Chapter 9 Copyright © 2012 The McGraw-Hill Companies, Inc. All rights reserved.

Balance on bank statement 12 8 0 0 00

Additions:

Check incorrectly charged 1 5 1 00

Check 2782 written for $200; paid by bank as $1,200 1 0 0 0 00

Check 2920 written for $285 paid by the bank twice 8 5 00

1 2 3 6 00 14 0 3 6 00 Deductions:

November 22 deposit of $580 credited by bank for $850 2 7 0 00

Outstanding checks 2 1 5 0 00 2 4 2 0 00

Adjusted book balance 11 6 1 6 00

Fierro Company Bank Reconciliation Statement

November 30, 2013

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EXERCISE 9.8

PAGE #

1 2013 1

2 Sept. 22 Ronnie Hunter, Drawing 2 4 0 00 2

3 Cash 2 4 0 00 3

4 To record ATM withdrawal by Ronnie 4

5 Hunter for personal use. 5

6 6

7 22 Cash 8 9 0 0 00 7

8 Accounts Receivable/Edwards UK 8 9 0 0 00 8

9 To record wire-transfer of funds received on 9

10 account from Edwards UK. 10

11 11

12 23 Utilities Expense 2 6 05 12

13 Cash 2 6 05 13

14 To record on-line payment to Orange Trash 14

15 Services. 15

16 16

17 24 Notes Payable 4 0 0 00 17

18 Cash 4 0 0 00 18

19 To record loan payment to Central Motors. 19

CREDIT GENERAL JOURNAL

DATE DESCRIPTION Post

Ref.

DEBIT

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Chapter 9 Copyright © 2012 The McGraw-Hill Companies, Inc. All rights reserved.

PAGE 1

1 2013 1

2 June 25 Cash 1 2 1 1 00 2

3 Cash Short and Over 620 9 00 3

4 Sales 1 2 2 0 00 4

5 5

6 26 Cash 1 3 2 2 00 6

7 Cash Short and Over 620 8 00 7

8 Sales 1 3 3 0 00 8

9 9

10 27 Cash 1 3 4 3 00 10

11 Cash Short and Over 620 1 00 11

12 Sales 1 3 4 2 00 12

13 13

14 28 Cash 1 2 6 4 00 14

15 Cash Short and Over 620 8 00 15

16 Sales 1 2 7 2 00 16

17 17

18 29 Cash 1 1 2 1 00 18

19 Cash Short and Over 620 2 00 19

20 Sales 1 1 1 9 00 20

21 21

22 30 Cash 1 3 5 0 00 22

23 Cash Short and Over 620 8 00 23

24 Sales 1 3 5 8 00 24

25 25

CREDIT GENERAL JOURNAL

DATE Post

Ref.

DEBIT DESCRIPTION

(11)

PROBLEM 9.1A (continued)

ACCOUNT Cash Short and Over ACCOUNT NO.

2013

June 25 J1 9 00 9 00

26 J1 8 00 1 7 00

27 J1 1 00 1 6 00

28 J1 8 00 2 4 00

29 J1 2 00 2 2 00

30 J1 8 00 3 0 00

GENERAL LEDGER

620

Analyze: The $30 debit balance in Cash Short and Over will be reported as expense on the Income Statement.

CREDIT BALANCE

DEBIT CREDIT

DATE DESCRIPTION Post

Ref.

DEBIT

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Chapter 9 Copyright © 2012 The McGraw-Hill Companies, Inc. All rights reserved.

PAGE 8

1 2013 1

2 June 1 Petty Cash Fund 3 0 0 00 2

3 Cash 3 0 0 00 3

4 Establish Petty Cash Fund, Check No. 550 4

5 5

6 30 Supplies 4 0 00 6

7 Delivery Expense 8 5 00 7

8 Miscellaneous Expense 8 1 00 8

9 Rosa Calderon, Drawing 5 0 00 9

10 Cash 2 5 6 00 10

11 Replenish Petty Cash Fund, Check No. 590 11

12 12

CREDIT DESCRIPTION

GENERAL JOURNAL

DATE Post

Ref.

DEBIT

(13)

PROBLEM 9.2A (continued)

PAGE

ACCOUNT NAME 2013

June 1 — Establish fund 3 0 0 00

5 1 Office supplies 4 0 00 4 0 00

8 2 Postage stamps 4 1 00 4 1 00

15 3 Delivery service 2 8 00 2 8 00

22 4 Personal withdrawal 5 0 00 Rosa Calderon, Drawing 5 0 00

25 5 Store windows 4 0 00 4 0 00

29 6 Delivery service 5 7 00 5 7 00

30 — Totals 3 0 0 00 2 5 6 00 4 0 00 8 5 00 8 1 00 5 0 00

30 — Balance on hand 4 4 00

3 0 0 00 3 0 0 00

30 — Balance on hand 4 4 00

30 — Replenish fund 2 5 6 00 30 — Carried forward 3 0 0 00

Analyze: The total payments from the petty cash fund were $256 in June.

1 DATE VOU

NO.

DESCRIPTION RECEIPTS PAYMENTS DISTRIBUTION OF PAYMENTS

PETTY CASH ANALYSIS SHEET

SUPPLIES DEBIT

DELIVERY EXPENSE

DEBIT

MISC.

EXPENSE DEBIT

OTHER ACCOUNTS DEBIT AMOUNT

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Chapter 9 Copyright © 2012 The McGraw-Hill Companies, Inc. All rights reserved.

Balance on bank statement 3 6 3 9 00

Additions:

Deposit of April 30 in transit 2 0 0 00

3 8 3 9 00 Deductions for outstanding checks:

Check 1214 of April 28 1 8 00

Check 1215 of April 30 1 5 00

Total outstanding checks 3 3 00

Adjusted bank balance 3 8 0 6 00

Balance in books 3 9 7 2 00

Deductions:

NSF check 1 6 0 00

Bank service charge 6 00 1 6 6 00

Adjusted book balance 3 8 0 6 00

Vacation Paradise Bank Reconciliation Statement

April 30, 2013

(15)

PROBLEM 9.3A (continued)

PAGE 1

1 2013 1

2 April 30 Accounts Receivable/Doris Fisher 1 6 0 00 2

3 Cash 1 6 0 00 3

4 To record NSF check returned by bank 4

5 5

6 30 Miscellaneous Expense 6 00 6

7 Cash 6 00 7

8 To record bank service charge for April 8

9 9

Analyze: Outstanding checks are 1214 and 1215 totaling $33.00.

CREDIT GENERAL JOURNAL

DATE DESCRIPTION Post

Ref.

DEBIT

(16)

Chapter 9 Copyright © 2012 The McGraw-Hill Companies, Inc. All rights reserved.

Balance on bank statement 13 1 9 7 00

Additions:

Deposit of August 30 in transit 1 4 5 0 00

Deposit of August 31 in transit 7 0 1 00 2 1 5 1 00

15 3 4 8 00 Deductions for outstanding checks:

Check 712 1 1 0 00

Check 713 1 2 5 00

Check 716 2 3 8 00

Check 736 5 7 7 00

Check 739 7 8 00

Check 741 1 2 0 00

Total outstanding checks 1 2 4 8 00

Adjusted bank balance 14 1 0 0 00

Balance in books 12 2 8 1 00

Additions:

Note receivable collected by bank 2 0 8 4 00

Interest on note receivable 6 3 00 2 1 4 7 00

14 4 2 8 00 Deductions:

NSF check 3 2 0 00

Bank service charge 8 00 3 2 8 00

Adjusted book balance 14 1 0 0 00

Sunoma Inn

Bank Reconciliation Statement August 31, 2013

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PROBLEM 9.4A (continued)

PAGE

1 2013 1

2 Aug. 31 Cash 2 1 4 7 00 2

3 Notes Receivable 2 0 8 4 00 3

4 Interest Income 6 3 00 4

5 To record receipt of amount due on note 5

6 plus interest collected by bank in August 6

7 7

8 31 Accounts Receivable/Neal Woodson 3 2 0 00 8

9 Cash 3 2 0 00 9

10 To record NSF check returned by bank 10

11 11

12 31 Miscellaneous Expense 8 00 12

13 Cash 8 00 13

14 To record bank service charge for August 14

15 15

Analyze: Net effect on the accounting equation of the journal entries recorded as a result of the bank reconciliation was an increase in assets by $55 and an increase in equity by $55 ($63 - $8).

CREDIT

GENERAL JOURNAL 10

DATE DESCRIPTION Post

Ref.

DEBIT

(18)

Chapter 9 Copyright © 2012 The McGraw-Hill Companies, Inc. All rights reserved.

Balance in books 20 2 7 5 00

Additions:

Check 2206 dated April 17 was recorded as $695;

check was actually written for $14 6 8 1 00

20 9 5 6 00 Deductions:

Check 2247 dated April 20 was recorded as $130;

check was actually written for $164 3 4 00

Adjusted book balance 20 9 2 2 00

Fontes Company Bank Reconciliation Statement

April 30, 2013

(19)

PROBLEM 9.5A (continued)

PAGE

1 2013 1

2 Apr. 30 Cash 6 8 1 00 2

3 Supplies 6 8 1 00 3

4 To correct error in entry for check 2206 4

5 of April 17 5

6 6

7 30 Utilities Expense 3 4 00 7

8 Cash 3 4 00 8

9 To correct error in entry for check 2247 9

10 of April 20 10

11 11

Analyze: Net income would have been overstated by $34.

GENERAL JOURNAL 11

DATE DESCRIPTION Post

Ref.

DEBIT CREDIT

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Chapter 9 Copyright © 2012 The McGraw-Hill Companies, Inc. All rights reserved.

Balance on Bank Statement 28 7 6 0 00

Additions:

Deposit of July 31 in transit 9 0 0 00

Check 1422 for $1,200 incorrectly charged as $1,280 8 0 00 9 8 0 00

29 7 4 0 00 Deductions for outstanding checks:

Check 1429 1 2 4 9 00

Check 1430 1 4 1 00

Total outstanding checks 1 3 9 0 00

Adjusted Bank Balance 28 3 5 0 00

Balance in Books 14 2 4 2 00

Additions:

EFT received on account from Foncier Ricard 14 4 0 0 00

28 6 4 2 00 Deductions:

Check 1425 written for $90; incorrectly recorded as $60 3 0 00

Online payment on July 31 to CentralComm 2 6 2 00 2 9 2 00

Adjusted Bank Balance 28 3 5 0 00

Far West Imports Bank Reconciliation Statement

July 31, 2013

(21)

PROBLEM 9.6A (continued)

PAGE

1 2013 1

2 July 31 Cash 14 4 0 0 00 2

3 Accounts Receivable/Foncier Ricard 14 4 0 0 00 3

4 EFT received on account from Foncier Ricard 4

5 of April 17 5

6 6

7 31 Supplies 3 0 00 7

8 Cash 3 0 00 8

9 To correct error for Check 1425 9

10 10

11 31 Telephone Expense 2 6 2 00 11

12 Cash 2 6 2 00 12

13 To record online payment to CentralComm 13

Analyze: Total expenses increased by $262 as a result of the general journal entries recorded.

GENERAL JOURNAL 19

DATE DESCRIPTION Post

Ref.

DEBIT CREDIT

(22)

Chapter 9 Copyright © 2012 The McGraw-Hill Companies, Inc. All rights reserved.

PAGE 1

1 2013 1

2 April 25 Cash 1 2 9 9 00 2

3 Cash Short and Over 620 1 00 3

4 Sales 1 3 0 0 00 4

5 5

6 26 Cash 1 0 5 1 00 6

7 Cash Short and Over 620 1 00 7

8 Sales 1 0 5 0 00 8

9 9

10 27 Cash 1 2 2 7 00 10

11 Cash Short and Over 620 3 00 11

12 Sales 1 2 3 0 00 12

13 13

14 28 Cash 1 1 8 6 00 14

15 Cash Short and Over 620 4 00 15

16 Sales 1 1 8 2 00 16

17 17

18 29 Cash 1 0 8 3 00 18

19 Cash Short and Over 620 1 00 19

20 Sales 1 0 8 2 00 20

21 21

22 30 Cash 1 2 1 9 00 22

23 Cash Short and Over 620 2 00 23

24 Sales 1 2 1 7 00 24

25 25

CREDIT GENERAL JOURNAL

DATE Post

Ref.

DEBIT DESCRIPTION

(23)

PROBLEM 9.1B (continued)

ACCOUNT Cash Short and Over ACCOUNT NO.

2013

April 25 J1 1 00 1 00

26 J1 1 00 0 00

27 J1 3 00 3 00

28 J1 4 00 1 00

29 J1 1 00 2 00

30 J1 2 00 4 00

Analyze: The $4 credit balance in Cash Short and Over will be reported as revenue on the Income Statement.

GENERAL LEDGER

CREDIT BALANCE

DEBIT CREDIT

DATE DESCRIPTION Post

Ref.

DEBIT

620

(24)

Chapter 9 Copyright © 2012 The McGraw-Hill Companies, Inc. All rights reserved.

PAGE 7

1 2013 1

2 Sept. 4 Petty Cash Fund 2 5 0 00 2

3 Cash 2 5 0 00 3

4 Establish Petty Cash Fund, Check No. 910 4

5 5

6 30 Supplies 3 2 00 6

7 Delivery Expense 5 4 00 7

8 Miscellaneous Expense 3 0 00 8

9 Fred Chin, Drawing 7 5 00 9

10 Cash 1 9 1 00 10

11 Replenish Petty Cash Fund, Check No. 950 11

12 12

Post Ref.

DEBIT CREDIT

GENERAL JOURNAL

DATE DESCRIPTION

(25)

PROBLEM 9.2B (continued)

PAGE

ACCOUNT NAME 2013

Sept. 4 — Establish fund 2 5 0 00

6 1 Delivery service 2 2 00 2 2 00

12 2 Bought office supplies 3 2 00 3 2 00

18 3 Personal withdrawal 7 5 00 Fred Chin, Drawing 7 5 00

24 4 Bought stamps 3 0 00 3 0 00

28 5 Delivery service 3 2 00 3 2 00

30 — Totals 2 5 0 00 1 9 1 00 3 2 00 5 4 00 3 0 00 7 5 00

30 — Balance on hand 5 9 00

2 5 0 00 2 5 0 00

30 — Balance on hand 5 9 00

30 — Replenish fund 1 9 1 00

30 — Carried forward 2 5 0 00

Analyze: The balance of the petty cash fund on September 30, after replenishment, is $250.

PETTY CASH ANALYSIS SHEET 1

VOU NO.

DESCRIPTION RECEIPTS PAYMENTS DISTRIBUTION OF PAYMENTS

DATE

SUPPLIES DEBIT

DELIVERY EXPENSE

DEBIT

MISC.

EXPENSE DEBIT

OTHER ACCOUNTS DEBIT AMOUNT

(26)

Chapter 9 Copyright © 2012 The McGraw-Hill Companies, Inc. All rights reserved.

Balance on bank statement 7 3 2 3 50

Additions:

Deposit of September 28 in transit 9 0 0 00

8 2 2 3 50 Deductions for outstanding checks:

Check 108 of September 15 7 5 00

Check 112 of September 27 1 4 0 00

Total outstanding checks 2 1 5 00

Adjusted bank balance 8 0 0 8 50

Balance in books 8 1 3 4 00

Deductions:

NSF check

Bank service charge 1 1 8 00

Adjusted book balance 7 50 1 2 5 50

8 0 0 8 50 Peter Chen, Attorney-at-Law

Bank Reconciliation Statement September 30, 2013

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PROBLEM 9.3B (continued)

PAGE 1

1 2013 1

2 Sept. 30 Accounts Receivable/Annette Cole 1 1 8 00 2

3 Cash 1 1 8 00 3

4 To record NSF check returned by bank 4

5 5

6 30 Miscellaneous Expense 7 50 6

7 Cash 7 50 7

8 To record bank service charge for September 8

9 9

Analyze: Seven checks were paid.

CREDIT GENERAL JOURNAL

DATE DESCRIPTION Post

Ref.

DEBIT

(28)

Chapter 9 Copyright © 2012 The McGraw-Hill Companies, Inc. All rights reserved.

Balance on bank statement 8 4 4 2 03

Additions:

Deposit of July 31 in transit 9 9 4 07

9 4 3 6 10

Deductions for outstanding checks:

Check 533 1 4 8 95

Check 535 1 2 2 50

Check 537 4 2 5 40

Total outstanding checks 6 9 6 85

Adjusted bank balance 8 7 3 9 25

Balance in books 7 3 1 8 59

Additions:

Note receivable collected by bank 1 5 5 0 00

Interest on note receivable 3 0 00 1 5 8 0 00

8 8 9 8 59 Deductions:

NSF check 1 4 5 00

Bank service charge 1 4 34 1 5 9 34

Adjusted book balance 8 7 3 9 25

Stacked Stone Masonry Bank Reconciliation Statement

July 31, 2013

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PROBLEM 9.4B (continued)

PAGE 1

1 2013 1

2 July 31 Cash 1 5 8 0 00 2

3 Notes Receivable 1 5 5 0 00 3

4 Interest Income 3 0 00 4

5 To record receipt of amount due on note 5

6 plus interest collected 6

7 7

8 31 Accounts Receivable/Robert Briggs 1 4 5 00 8

9 Cash 1 4 5 00 9

10 To record NSF check returned by bank 10

11 11

12 31 Miscellaneous Expense 1 4 34 12

13 Cash 1 4 34 13

14 To record bank service charge for July 14

15 15

Analyze: After all journal entries have been posted, the balance in the Cash account is $8,739.25.

CREDIT GENERAL JOURNAL

DATE DESCRIPTION Post

Ref.

DEBIT

(30)

Chapter 9 Copyright © 2012 The McGraw-Hill Companies, Inc. All rights reserved.

Balance in books 19 4 5 1 00

Additions:

Check 1301 dated February 18 was recorded as $361;

check was actually written for $316 4 5 00

19 4 9 6 00 Deductions:

Check 1322 dated February 24 was recorded as $404;

check was actually written for $440 3 6 00

Adjusted book balance 19 4 6 0 00

February 28, 2013 Big Guy Movers Bank Reconciliation Statement

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PROBLEM 9.5B (continued)

PAGE 1

1 2013 1

2 Feb. 28 Cash 4 5 00 2

3 Hauling Expense 4 5 00 3

4 To correct error in entry for check 1301 4

5 of February 18 5

6 6

7 28 Telephone Expense 3 6 00 7

8 Cash 3 6 00 8

9 To correct error in entry for check 1322 9

10 of February 24 10

11 11

Analyze: The net change to the Cash account was an increase of $9.

CREDIT GENERAL JOURNAL

DATE DESCRIPTION Post

Ref.

DEBIT

(32)

Chapter 9 Copyright © 2012 The McGraw-Hill Companies, Inc. All rights reserved.

Balance on Bank Statement 29 7 3 4 00

Additions:

Deposit of November 30 in transit 1 2 2 4 00

30 9 5 8 00 Deductions:

Deductions for outstanding checks:

Check 4129 1 3 2 2 00

Check 4130 2 3 9 00

Total outstanding checks 1 5 6 1 00

Check 4122 written for $1,200, paid by bank as $1,000 1 0 0 00

Adjusted Bank Balance 29 2 9 7 00

Balance in Books 16 6 3 0 00

Additions:

EFT received on account from Cantori Cucine 12 8 0 0 00

Check 4125 written for $890; incorrectly recorded as $980 9 0 00 12 8 9 0 00 29 5 2 0 00 Deductions:

Online payment on November 30 to ClearComm 3 2 3 00

Adjusted book balance 29 1 9 7 00

Euro Specialty Products Bank Reconciliation Statement

November 30, 2013

(33)

PROBLEM 9.6B (continued)

PAGE

1 2013 1

2 Nov 30 Cash 12 8 0 0 00 2

3 Accounts Receivable/Cantori Cucine 12 8 0 0 00 3

4 EFT received on account from Cantori Cucine 4

5 5

6 30 Cash 9 0 00 6

7 Equipment 9 0 00 7

8 To correct error for Check 4125 8

9 9

10 30 Telephone Expense 3 2 3 00 10

11 Cash 3 2 3 00 11

12 To record online payment to ClearComm 12

Analyze: Total assets decreased by $323 as a result of the general journal entries recorded.

GENERAL JOURNAL 19

DATE DESCRIPTION Post

Ref.

DEBIT CREDIT

(34)

Chapter 9 Copyright © 2012 The McGraw-Hill Companies, Inc. All rights reserved.

1.

DATE CASH

COUNT

LESS:

CHANGE FUND

BANK DEPOSIT

SALES, PER CASH REGISTER TAPE

AMOUNT SHORT

August 1 $2,496.20 $400.00 $2,096.20 $2,222.50 $ (126.30)

August 2 2,352.80 $400.00 1,952.80 2,135.90 (183.10)

August 3 2,451.45 $400.00 2,051.45 2,303.45 (252.00)

August 4 2,597.20 $400.00 2,197.20 2,287.30 (90.10)

August 5 2,644.05 $400.00 2,244.05 2,335.45 (91.40)

August 6 2,460.10 $400.00 2,060.10 2,155.50 (95.40)

August 7 2,592.40 $400.00 2,192.40 2,255.90 (63.50)

Totals $17,594.20 $14,794.20 $15,696.00 $ (901.80)

(35)

CRITICAL THINKING PROBLEM 9.1 (continued)

2.

PAGE

1 2013 1

2 Aug. 7 Cash 14 7 9 4 20 2

3 Cash Short and Over 9 0 1 80 3

4 Sales 15 6 9 6 00 4

5 5

3. Jim should count the cash in the cash register with George at the end of his shift. Jim should print a cash register tape and compare it with the amount of cash in the cash register, less the $400 change fund. Jim should perform the same procedure with Alice at the end of her shift. Jim should also compare the amount of the sales for the day per the cash register tape with the amount of the bank deposit, and investigate any significant variances.

GENERAL JOURNAL 56

DATE DESCRIPTION Post

Ref.

DEBIT CREDIT

(36)

Chapter 9 Copyright © 2012 The McGraw-Hill Companies, Inc. All rights reserved.

Balance on bank statement 16 5 8 9 00

Addition: Deposit in transit, August 28 4 9 9 2 00

21 5 8 1 00 Deductions for outstanding checks:

Check 1590 2 6 3 00

Check 1680 1 9 1 8 00

Check 1724 4 8 6 00

Check 1780 7 9 2 00

Check 1784 1 8 1 9 00

Check 1806 4 8 4 00

Total outstanding checks 5 7 6 2 00

Adjusted bank balance 15 8 1 9 00

Balance in books 18 7 9 6 00

Deduction: Bank service charge 1 0 00

Adjusted book balance 18 7 8 6 00

Less: Cash shortage 2 9 6 7 00

Corrected adjusted book balance 15 8 1 9 00

The cash shortage is the difference between the adjusted bank balance of $15,819 and the adjusted book balance of $18,786. This is the amount needed to have both parts of the bank reconciliation equal. Gloria concealed her theft by omitting checks 1590 ($263), 1680 ($1,918), and 1724 ($486). The total amount of these checks is $2,667. Added to the $300 error made in adding the outstanding checks on Gloria Harris’ bank reconciliation, the total cash shortage is $2,967.

Since Gloria Harris handled all cash records, it was relatively easy for her to conceal her theft. Tony should separate the jobs of receiving cash, making disbursements, maintaining accounting records, and preparing bank reconciliations. If the company is not large enough to permit different people to handle these jobs, then Tony should oversee the cash/accounting functions more closely, including reconciliation of the bank account.

If Tony does not have the time to do this, he could hire an independent accountant to review the cash/

accounting records on a monthly basis and then report any discrepancies to him.

Scavone Builders Bank Reconciliation Statement

August 31, 2013

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SOLUTIONS TO BUSINESS CONNECTIONS

Managerial Focus:

1. a. No assurance money taken actually accounted for.

b. A gap in the control of cash exists, and unauthorized expenditures can be made.

c. Increases the opportunity for theft; no current cash position is known.

d. Increases risk of theft.

e. Weakens internal control over cash receipts.

2. Payment of bills in timely fashion, anticipation of fund shortages or overages, take advantage of investment opportunities.

3. Loss of control and check-and-balance system.

4. a. Yes. Blank endorsements are not secure.

b. Yes. Checkbook should be kept in a locked drawer and should be available only to specified employee.

c. Yes. To deter fraud, different tasks should be assigned to different employees.

d. Yes. Reconciliation should be done soon after receiving bank statement.

e. Yes. Financial records should be maintained for a reasonable number of years in case of a tax audit or if records are destroyed.

f. No. The task would be impractical for a large firm.

5. Essential assets should be safeguarded against loss and theft.

6. Up-to-date cash position; information for day-to-day business decisions.

7. Insures again losses.

8. Control of cash; audit trail.

Ethical Dilemma:

Financial Statement Analysis:

1. 10.20%

2. Increased by $902 million.

3. The balance reported for “Cash and cash equivalents” would be understated by $125,000.

Teamwork:

Daniel should be sure to pay this $30 to petty cash immediately. He can then record cash short/over the next month.

Daniel should be sure to never borrow money from petty cash, as it is not his money.

A Sales Invoice for each job should be given to each customer with a place to incorporate any additions or subtractions for service. Any changes must be communicated to the home office and an approval number will be given. The Sales Invoice, as well as each change, should be signed by the customer. Only cash and money orders should be allowed since the families have just moved and do not currently have a local bank.

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Chapter 9 Copyright © 2012 The McGraw-Hill Companies, Inc. All rights reserved.

Part A True-False

1. TRUE 9. TRUE

2. FALSE 10. TRUE

3. FALSE 11. FALSE

4. FALSE 12. FALSE

5. TRUE 13. TRUE

6. FALSE 14. FALSE

7. FALSE 15. TRUE

8. TRUE 16. FALSE

Part B Matching

1. d 8. l

2. i 9. a

3. g 10. j

4. b 11. c

5. f 12. k

6. e 13. m

7. h

Figure

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