1. Chapter 8-1 Chapter 8 Fraud, Internal Control and Cash Accounting Principles, Ninth Edition

2. Chapter 8-2 Bank Statements Debit Memorandum Bank service charge NSF (not sufficient funds) SO 6 Indicate the control features of a bank account. Illustration 8-10 Credit Memorandum Collect notes receivable. Interest earned. Control Features: Use of a Bank

3. Chapter 8-3 The control features of a bank account do not include: a.having bank auditors verify the correctness of the bank balance per books. b.minimizing the amount of cash that must be kept on hand. c.providing a double record of all bank transactions. d.safeguarding cash by using a bank as a depository. Review Question SO 6 Indicate the control features of a bank account. Control Features: Use of a Bank

4. Chapter 8-4 Reconciliation Procedures SO 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 +-Company Errors CORRECT BALANCE Illustration 8-11 Control Features: Use of a Bank

5. Chapter 8-5 Reconciling the Bank Account SO 7 Prepare a bank reconciliation. Reconcile balance per books and balance per bank to their adjusted (corrected) cash balances. Reconciling Items: 1. Deposits in transit. 2. Outstanding checks. 3. Errors. 4. Bank memoranda. Control Features: Use of a Bank

6. Chapter 8-6 Illustration: Illustration: The bank statement for Laird Company (Illustration 8-10), shows a balance per bank of $15,907.45 on April 30, 2010. On this date the balance of cash per books is $11,589.45. Using the four reconciliation steps, Laird determines the following reconciling items. Control Features: Use of a Bank

7. Chapter 8-7 Illustration: Illustration: a) Prepare a bank reconciliation at April 30. SO 7 Prepare a bank reconciliation. Cash balance per bank statement$15,907.45 Add: Deposit in transit2,201.40 Less:Outstanding checks(5,904.00) Adjusted cash balance per bank$12,204.85 Cash balance per books$11,589.45 Collection of notes + interest - fee1,035.00 Add:Error in recording check no. 44336.00 Less:NSF check(425.60) Bank service charge(30.00) Adjusted cash balance per books$12,204.85 Control Features: Use of a Bank Illustration 8-12

8. Chapter 8-8 Illustration: Illustration: a) Prepare a bank reconciliation at April 30. SO 7 Prepare a bank reconciliation. Cash balance per bank statement$15,907.45 Add: Deposit in transit2,201.40 Less:Outstanding checks(5,904.00) Adjusted cash balance per bank$12,204.85 Cash balance per books$11,589.45 Collection of notes + interest - fee1,035.00 Add:Error in recording check no. 44336.00 Less:NSF check(425.60) Bank service charge(30.00) Adjusted cash balance per books$12,204.85 Control Features: Use of a Bank Illustration 8-12

9. Chapter 8-9 The company records each reconciling item used to determine the adjusted cash balance per books. Collection of Note Receivable: Assuming interest of $50 has not been accrued and collection fee is charged to Miscellaneous Expense, the entry is: SO 5 Describe the operation of a petty cash fund. Cash 1,035.00Apr. 30 Miscellaneous expense15.00 Notes receivable1,000.00 Interest revenue50.00 Control Features: Use of a Bank

10. Chapter 8-10 Book Error: The cash disbursements journal shows that check no. 443 was a payment on account to Andrea Company, a supplier. The correcting entry is: SO 5 Describe the operation of a petty cash fund. Cash 36.00Apr. 30 Accounts payable36.00 Control Features: Use of a Bank

11. Chapter 8-11 NSF Check: As indicated earlier, an NSF check becomes an account receivable to the depositor. The entry is: SO 5 Describe the operation of a petty cash fund. Accounts receivable425.60Apr. 30 Cash425.60 Bank Service Charges: Depositors debit check printing charges (DM) and other bank service charges (SC) to Miscellaneous Expense. The entry is: Miscellaneous30.00Apr. 30 Cash30.00 Control Features: Use of a Bank

12. Chapter 8-12 Electronic Funds Transfers (EFT) Disbursement systems that uses wire, telephone, or computers to transfer cash balances between locations. EFT transfers normally result in better internal control since no cash or checks are handled by company employees. Control Features: Use of a Bank SO 7 Prepare a bank reconciliation.

13. Chapter 8-13 Q8-23. Lori Figgs is confused about the lack of agreement between the cash balance per books and the balance per the bank. Explain the causes for the lack of agreement to Lori, and give an example of each cause. See notes page for discussion Discussion Question SO 7 Prepare a bank reconciliation. Control Features: Use of a Bank

14. Chapter 8-14 Reporting Cash SO 8 Explain the reporting of cash. Cash consists of coins, currency (paper money), checks, money orders, and money on hand or on deposit in a bank or similar depository. Cash equivalents Restricted cash Compensating balances Illustration 8-14

15. Chapter 8-15 The reconciling item in a bank reconciliation that will result in an adjusting entry by the depositor is: a. outstanding checks. b. deposit in transit. c. a bank error. d. bank service charges. Review Question SO 7 Prepare a bank reconciliation. Control Features: Use of a Bank

16. Chapter 8-16 Which of the following statements correctly describes the reporting of cash? a.Cash cannot be combined with cash equivalents. b.Restricted cash funds may be combined with Cash. c.Cash is listed first in the current assets section. d.Restricted cash funds cannot be reported as a current asset. Review Question Reporting Cash SO 8 Explain the reporting of cash.

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