Cash Control Systems

 Major cash payments made in checks  Small cash payments made out of small cash fund/petty cash  Cash transactions occur frequently  Errors  Lost  Transferred to unauthorized individuals

 Checking Account-A bank account from which payments can be ordered by a depositor  Authorized signers for a checking account must sign signature card  Deposit Slip-A bank form which lists the checks, currency, and coins an account holder is adding to the bank account

 Endorsement- A signature or stamp on the back of a check transferring ownership  Federal regs state signature has to be in limited space on back of check  Blank Endorsement- Consists only of the endorser’s signature  Special Endorsement – Indicating a new owner of a check- Pay to the order of  Restrictive Endorsement- For deposit only

 Checks # in order  Concept: Objective Evidence- Check stub is source document  COMPLETE CHECK STUB 1 ST !

 Banks refuse altered checks  Voided Check- A check that cannot be processed because the maker has made it invalid  Write VOID in large letters across check  Place entry in journal

Bank Reconciliation

 Bank Statement- A report of deposits, withdrawals, and bank balances sent to a depositor by a bank  Canceled check- a check which has been paid by the bank  Outstanding Checks- Checks written but not cleared through the bank  Outstanding Deposits-Deposits made too late to appear on the statement

BANK STMT BAL.CHECK STUB BALANCE + Outstanding Deposits - Outstanding Checks New Balance = - Service Charge New Balance

 Must write service charge on next check stub  Must write entry to record service charge- always Miscellaneous Expense

Dishonored Checks and Electronic Banking

 Dishonored Check-A check that a bank refuses to pay  NSF Check- A check dishonored by the bank because of insufficient funds in the account of the maker of the check  Bank will charge depositor a fee for handling NSF check  Remove from cash and place back in A/R  Write on check stub  Write journal entry

 Electronic Funds Transfer- A computerized cash payments system that transfers funds without the use of checks, currency, or other paper documents  Electronic payment is still a cash payment- check is not source document

 Debit Card- A bank card that automatically deducts the amount of a purchase from the checking account of the cardholder  Debit card automatically deducts from checking  Using a debit card is a cash payment-Check is not source document

Petty Cash

 Petty Cash- An amount of cash kept on hand and used for making small payments  Petty cash is an asset-normal balance sides of an asset  Petty cash slip- A form showing proof of a petty cash payment

 Petty cash must be replenished  Create a petty cash report to verify amounts paid out.  Errors can be made between cash paid out and actual amount on hand  Cash Short- A petty cash on hand amount that is less than the recorded amount  Cash Over- A petty cash on hand amount that is more than the recorded amount

 Must fill out report and write entry  Cash Over and Short has no normal balance side  Most often cash is short  Usually classified as an expense