1. Chapter 7 Cash Accounting, 21st Edition Warren Reeve Fess
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PowerPoint Presentation by Douglas Cloud Professor Emeritus of Accounting Pepperdine University

2. Some of the action has been automated, so click the mouse when you see this lightning bolt in the lower right-hand corner of the screen. You can point and click anywhere on the screen.

3. After studying this chapter, you should be able to:
Objectives
1. Describe the nature of cash and the importance of internal control over cash.
2. Summarize basic procedures for achieving internal control over cash receipts.
3. Summarize basic procedures for achieving internal control over cash payments, including the use of a voucher system.
4. Describe the nature of a bank account and its use in controlling cash.
After studying this chapter, you should be able to:

4. Objectives
5. Prepare a bank reconciliation and journalize any necessary entries.
6. Account for small cash transactions using a petty cash fund.
7. Summarize how cash is presented on the balance sheet.
8. Compute and interpret the ratio of cash to current liabilities.

5. Control Over Cash
Many companies need several cash accounts to account for different cash categories and funds.
Most companies have multiple bank accounts. The title for each bank account should be: Cash in Bank—(Name of Bank)
Preventive controls protect cash from theft and misuse of cash.
Detective controls are designed to detect theft or misuse of cash and are also preventive in nature.

6. Retailers’ Sources of Cash ACCOUNTINGDEPARTMENT
Register records
Cash Receipts
CASHIER’S DEPARTMENT
ACCOUNTINGDEPARTMENT
Mail Receipts
Remittance advices

7. Retailers’ Sources of Cash ACCOUNTINGDEPARTMENT
CASHIER’S DEPARTMENT
ACCOUNTINGDEPARTMENT
Deposit ticket 1
Bank
Deposit receipt

8. Controlling Cash Received from Cash Sales
Cash Short and Over 8 00
Sales
To record cash sales and actual cash on hand.
Cash sales for March 19 totaled $3, per the cash register tape. After removing the change fund, only $3, was on hand.

9. Controlling Cash Received in the Mail
Most companies’ invoices are designed so that customers return a portion of the invoice, call a remittance advice.

10. Controlling Cash Received in the Mail
1. The employee who opens the mail should initially compare the amount received with the amount on the remittance advice.
2. The employee opening the mail stamps checks and money orders “For Deposit Only” in the bank account of the business.
3. All cash is sent to the Cashier’s Department where checks and money orders are combined with receipts from cash sales and a bank deposit ticket is prepared.

11. Controlling Cash Received in the Mail
4. The remittance advices and their summary totals are delivered to the Accounting Department where a clerk prepares the records of the transactions and posts them to the customer account.
5. The stamped duplicate copy of the deposit ticket is returned to the Accounting Department where a clerk compares the receipt with the total amount that should have been deposited.

12. Internal Control of Cash Payments
1. Cash controls must provide assurance that payments are made for only authorized transactions.
2. Cash controls should ensure that cash is used efficiently.
3. A voucher system provides assurance that what is being paid for was properly ordered, received, and billed by the supplier.

13. Basic Features of the Voucher System13
A voucher system is a set of procedures for authorizing and recording liabilities and cash payments.
Basic Features of the Voucher System

14. Basic Features of the Voucher System
A voucher system normally uses vouchers.
The system normally has a file for unpaid vouchers and a file for paid vouchers.
Usually prepared by the Accounting Department after all necessary supporting documents are received (purchase order, supplier’s invoice, and a receiving report).
In preparing the voucher, the accounts payable clerk verifies the quantity, price, and mathematical accuracy of the supporting documents and files the paid voucher.

15. A summary received from the bank of all account transaction is called a statement of account.

16. A bank reconciliation is a listing of the items and amounts that cause the cash balance reported in the bank statement to differ from the balance of the cash account in the ledger.

17. Reasons for Differences Between Depositor’s Records and the Bank Statement
Outstanding checks
Deposits in transit
Service charges
Collections
Not-sufficient-funds (NSF) checks
Errors