1. Professor Eric Carstensen
Cash Control
Professor Eric Carstensen
MiraCosta College

2. Cash and Cash Equivalents
Cash refers to many items other than currency (paper money) and coins. Also included are checking accounts, savings accounts and petty cash, along with checks from customers.
Cash equivalents are short-term (maturing in three months or less), highly liquid investments such as money markets and treasury bills that are readily convertible to known amounts of cash.

3. Control of Cash
Cash handling and recordkeeping should be performed by different people (separation of duties).
Make daily cash deposits.
All payments made by check.
Collect receivables as soon as possible; delay payments as long as possible.
Plan/Budget for expenditures.

4. Bank Reconciliation Process
The bank balance and cash ledger balance are rarely, if ever, the same
The company has information that the bank does not, and vice-versa
When reconciling, we take what the company knows and send it to the bank side (deposits, outstanding checks, for example)
Information from the statement is sent to the company side of the reconciliation (charges and fees, for example)

5. Bank Reconciliation Example
You just received the bank statement and the bank indicates a balance of $13, while your records
show a debit balance of $11, in the cash account.
You discover that the deposit you made late last week isn't on the statement; that totaled $
One of your customer's checks was returned for Not Sufficient Funds; that check was written for
$ Outstanding checks were #135 for $375.00, #137 for $ and #141 for $1,
Your service charge from the bank is $18.00 per month. You also find that check #136 was correctly
written for $ for advertising, but it was recorded as $ Finally, a purchase return of
$1, was deposited directly into your account.
Prepare the reconciliation and the necessary adjusting entries.

6. Bank Rec Example - Continued
Your Balance
11,244.55
Bank Balance
13,493.36
add: direct deposit
1,712.77
add: deposit in transit
821.11
12,957.32
14,314.47
less: NSF
(557.65)
less Outstanding Checks:
less: service
(18.00)
#135
(375.00)
less: error #136
(36.00)
#137
(264.82)
(611.65)
#141
(1,328.98)
(1,968.80)
reconciled balance
12,345.67

7. Bank Rec Example - Concluded1
cash
1,712.77
inventory
to account for purchase return 2
accts receivable
557.65
to establish receivable for NSF check 3
bank fees & charges
18.00
to account for bank service charge 4
advertising expense
36.00
to correct recording error check #136

8. Petty Cash System
Most employees do not have company credit cards, but, sometimes need to make purchases on behalf of the company
Used when writing a check would be impractical and/or too time-consuming
Employs a petty cash register
Custodian of the register is not responsible for record keeping (separation of duties)

9. Establishing a Petty Cash Account1
petty cash
200.00
cash
to establish petty cash account
50.00
to increase petty cash account
to decrease petty cash account

10. Petty Cash Example Transactions
Voucher
Date
Description 1
01-02
reimburse G/L accountant $21.65 for mileage 2
01-03
purchase pizzas for accounting dept lunch - $38.50 3
01-07
reimburse A/R clerk $42.00 for train ticket to seminar 4
01-10
purchase VG donuts for customer sales call - $12.36 5
01-15
reimburse receptionist for office supplies - $12.75 6
01-17
reimburse admin assistant for stamps - $19.80 7
01-22
purchase palnt for reception desk - $16.49 8
01-29
purchase birthday cake for payroll specialist - $22.54

11. Petty Cash Register Example
Petty Cash Payments
For the Month of
January
Year
20XX
Page
1 of 1
Voucher
Total
Distribution of Payments *
Date
Description
No.
Amount
Travel
Postage
Staff Meals
Cust. Meals
Supplies
Misc. Exp. 1
Received in Fund
200.00 2
Mileage Reimbursement
21.65 3
Staff Luncheon
38.50 7
Train Ticket
42.00 10
Customer Sales Call 4
12.36 15 5
12.75 17
Postage Stamps 6
19.60 22
Plant for Reception Desk
16.49 29
Birthday Cake 8
22.54
185.89
63.65
61.04 31
Balance
14.11
Replenish Fund
* please note that each company will use different accounts, depending on their unique business needs

12. Resulting Petty Cash Journal Entry1 31
Travel Expense
63.65
Postage Expense
19.60
Staff Meals & Ent. Expense
61.04
Customer Meals & Ent. Expense
12.36
Supplies Expense
12.75
Miscellaneous Expense
16.49
Cash
185.89

13. Cash Short Example 1 31 Travel Expense 63.65 Postage Expense 19.601 31
Travel Expense
63.65
Postage Expense
19.60
Staff Meals & Ent. Expense
61.04
Customer Meals & Ent. Expense
12.36
Supplies Expense
12.75
Miscellaneous Expense
16.49
Cash Over & Short
2.00
Cash
187.89

14. Cash Over Example 1 31 Travel Expense 63.65 Postage Expense 19.601 31
Travel Expense
63.65
Postage Expense
19.60
Staff Meals & Ent. Expense
61.04
Customer Meals & Ent. Expense
12.36
Supplies Expense
12.75
Miscellaneous Expense
16.49
Cash Over & Short
2.00
Cash
183.89