Chapter 8-1 CHAPTER 8 INTERNAL CONTROL AND CASH

Chapter 8-2 Cash Controls Cash consists of coins, currency, checks, money orders, and money on hand or on deposit in a bank. Cash receipts come from: cash sales collections on account from customers receipt of interest, rent, and dividends investments by owners bank loans proceeds from the sale of noncurrent assets LO 3 Explain the applications of internal control principles to cash receipts.

Chapter 8-3 Contributes to good internal control over cash. Minimizes the amount of currency on hand. Creates a double record of bank transactions. Bank reconciliation. Use of a Bank LO 6 Indicate the control features of a bank account.

Chapter 8-4 Writing Checks Written order signed by depositor directing bank to pay a specified sum of money to a designated recipient. Use of a Bank LO 6 Indicate the control features of a bank account. Maker Payee Illustration 8-11 Payer

Chapter 8-5 Bank Statements Debit Memorandum Bank service charge NSF (not sufficient funds –bounced check) Use of a Bank LO 6 Indicate the control features of a bank account. Illustration 8-12 Credit Memorandum Collect notes receivable. Interest earned.

Chapter 8-6 Reconciling Items Bank Statement Balance Deduct: Outstanding checks. Deduct: Outstanding checks. Add: Deposits in transit. Add: Deposits in transit. Add or Deduct: Bank errors. Add or Deduct: Bank errors. Bank Statement Balance Deduct: Outstanding checks. Deduct: Outstanding checks. Add: Deposits in transit. Add: Deposits in transit. Add or Deduct: Bank errors. Add or Deduct: Bank errors. Book Balance Deduct: Nonsufficient funds check (NSF). Deduct: Nonsufficient funds check (NSF). Deduct: Bank service charge. Deduct: Bank service charge. Add: Interest earned on checking account. Add: Interest earned on checking account. Add: Collections made by the bank. Add: Collections made by the bank. Add or Deduct: Book errors. Add or Deduct: Book errors. Book Balance Deduct: Nonsufficient funds check (NSF). Deduct: Nonsufficient funds check (NSF). Deduct: Bank service charge. Deduct: Bank service charge. Add: Interest earned on checking account. Add: Interest earned on checking account. Add: Collections made by the bank. Add: Collections made by the bank. Add or Deduct: Book errors. Add or Deduct: Book errors.

Chapter 8-7 Reconciliation Procedures Use of a Bank LO 7 Prepare a bank reconciliation. + Deposit in Transit - Outstanding Checks +- Bank Errors +Notes collected by bank -NSF (bounced) checks -Check printing or other service charges +-Book Errors CORRECT BALANCE Illustration 8-13

Chapter 8-8 E8-11 E8-11 The following information pertains to Family Video Company. 1. Cash balance per bank, July 31, $7, Cash balance per books, July 31, $7, July bank service charge not recorded by the depositor $ Deposits in transit, July 31, $1, Bank collected $900 note for Family in July, plus interest $36, less fee $20.The collection has not been recorded by Family, and no interest has been accrued. 6. Outstanding checks, July 31, $591. Instructions a)Prepare a bank reconciliation at July 31. b)Journalize the adjusting entries at July 31 on the books of Family Video Company. Use of a Bank LO 7 Prepare a bank reconciliation.

Chapter 8-9 E8-11 E8-11 a) Prepare a bank reconciliation at July 31. Use of a Bank LO 7 Prepare a bank reconciliation. Cash balance per bank statement $7,263 Add: Deposit in transit1,500 Less:Outstanding checks(591) Adjusted cash balance per bank$8,172 Cash balance per books $7,284 Add: Collection of notes receivable900 Collection of interest36 Less:Bank service charge(28) Note collection fee(20) Adjusted cash balance per books$8,172

Chapter 8-10 Cash888July 31 Bank charge expense28 Miscellaneous expense20 Notes receivable900 Interest revenue36 Use of a Bank LO 7 Prepare a bank reconciliation. E8-11 E8-11 b) Journalize the adjusting entries at July 31 on the books of Family Video Company. Note: Note: Adjusting journal entry includes only the adjustments to the cash balance per books. Dr.Cr.