Cash Unit Six

Learning Objectives Unit Six to understand the definition of cash; to describe the nature of cash; to understand internal cash control.

We are all concerned about our cash. Likewise, businesses are concerned about safeguarding and controlling cash. Inadequate controls can and often do lead to theft, misuse of funds, or otherwise embarrassing situations. To detect errors, whom should control procedures be used by? Warming-up Unit Six

Text Skimming Ask students to read the text quickly and ask them some questions. 1. Could you give the definition of cash? 2. Do you know the nature of cash? 3. A business engages in three basic categories of business activities. What are they? 4. What do the practice for petty cash fund include? 5. Why should we reconcile the bank balance?

Vocabulary Unit Six deposit check IOU exclude definition earmark prohibit receipt sustain reimburse external electronic funds transfer reconcile disbursement outstanding check 储蓄，贮存延期的 支票 借据 除去，不把... 包括在内 定义 指定 ( 资金的 ) 用途，特殊记号， 特征 禁止，阻止；防止 收据 确认，认可 偿还，赔 [ 补 ] 偿；报销 外部的 电子资金转账；电子资金汇兑 调解 支付，支出 未兑现支票

Presentation Cash Cash can be defined as money on deposit in banks and any items that banks will accept for deposit.

Cash coins paper money checks money paper

notes receivable IOUs postdate checks uncollected customers’ check ---returned by the bank stamped “NFS” They are excluded in the accountant’s definition of cash.

A business engages in three basic categories of business activities: Operating activities Investing activities Financing activities

Operating activities create revenues and expenses. The largest cash inflow from operations is the collection of cash from customers. The operating outflows include cash payments to suppliers and employees and cash payments for interest and taxes. In long run, operations must be the main source of a business’s cash. Investing activities are the buying and selling of the long-term assets the business uses and financing activities obtain the cash needed to launch and sustain the business.

A petty cash fund It is established to make small cash payments, so that checks need not be written every time.

The practice for petty cash fund includes: Establish the fund Make petty cash payments Reimburse the fund

Reconciling the Bank Balance The purpose of bank statement They provide a separate and external record of all cash transactions and can be used to prove the cash balance in the company’s own records.

Need for Reconciling the Bank Balance The cash balance shown on the bank statement and the balance according to the cash account in the organization’s ledger seldom agree. It is therefore necessary to reconcile the account for any differences.

The differences are caused by timing differences or errors. Timing differences occur when: Items recorded by the company but not yet recorded by the bank include:

Deposit in transit—Money that has been deposited by the company but not yet recorded by the bank; Outstanding checks—Checks that have been issued by the company but not yet paid by the bank.

Items recorded by the bank but not yet recorded by the company include: Bank collections – Money collected by the bank on behalf of its customers; Electronic funds transfer (EFT)—The bank statement may include EFT’s that the company has not yet recorded.

Service charges—Fees that the bank charges for certain services and are not be known until the bank statement is received. Interest revenue earned on the checking account – The amount of interest earned may not be known until the bank statement is received.

Non-sufficient funds checks(NSF) – NSF checks returned to the payee; Check printing charge – A fee that the bank charges for printing checks.

Steps in Reconciling the Bank Balance Before we begin the monthly bank reconciliation, we should review the previous month’s bank reconciliation in order to determine that errors, if any, have been corrected and that items in transit or outstanding have cleared the bank. Ask students to read the chart at P.46.

Notes Unit Six NFS: not sufficient funds 存款不足 petty cash fund 备用金（制度） 为了便于小额现金支出，而置存一个固定数字的现金，以定 额备用金的形式加以管理。 Electronic funds transfer (EFT) 电汇 bank reconciliation 银行存款调节表 由于未达帐项或其他差错等原因，企业的现金日记账与银行 对账单通常不能直接核对一致，而必须通过编制银行存款调 节表，将未达帐项和差错进行调整和改正后，二者才能核对 相符。

Cash Unit Six

Review 1. Ask students to read all the new words and phrases. 2. Review the language points.

Exercises Unit Six I. Choose the best answer. 1. CanTex had $54 in missing petty cash receipts. What is the correct treatment? A. Debit Cash Over and Short for $54. B. Credit Cash Over and Short for $54. C. Debit Petty Cash for $54. D. Credit Petty Cash for $ Zimbooru Company had $12 in extra cash at the end of the day. What is the correct treatment? A. Credit Cash for $12. B. Debit Cash for $12. C. Credit Cash Over and Short for $12. D. Debit Cash Over and Short for $12. √ √

Exercises Unit Six 3. The custodian of a $500 petty cash fund has $62.50 in coins and currency plus $ in receipts at the end of the month. What will the entry to replenish the petty cash fund include? A. A debit to Miscellaneous Expenses for $ B. A credit to Cash Over and Short for $5.00. C. A credit to Cash for $ D. A credit to Cash for $ √

Exercises Unit Six 4. EpsCo plans to eliminate a $200 petty cash fund. The current balance in the account includes $45 in receipts and $165 in currency. What will the entry to eliminate the fund include? A. Debit to Cash Short and Over for $10. B. Debit to Cash for $165. C. Debit to Miscellaneous Expenses for $35. D. Credit to Petty Cash for $165. √

Exercises Unit Six 5. For what reason might a bank issue a debit memorandum? A. To notify a depositor of all increases to the depositor’s account. B. To notify a depositor of a deduction to a depositor’s account. C. To notify a depositor of an electronic funds transfer into their account. D. To notify a depositor of an error in the depositor’s accounting records. √

Assignments Do Ex. Ⅱ & Ⅲ in the exercise books.