1. Chapter 10 – Cash Control and Banking
BAF3M Accounting
Chapter 10 – Cash Control and Banking
Idea: do the payment systems (cash, check, credit, debit, direct) as a group “prepare and present” activity

2. 10.1 Payment Systems
Def’n: a method for people to exchange one value for another
Ex. You trade $20 for a T shirt at a concert
You get a “Rockin’” T, the vendor gets your $20 bill

3. 10.1 Payment Systems 5 main ones exist: Cash Cheques or “Checks”
Credit Cards
Debit Cards
Direct Payments

4. 10.1 Payment Systems Cash Dollar bills, coins Popular, Easy
Volume of transactions large, value of each individual transaction is small
Anonymity
Security concerns

5. 10.1 Payment Systems Cheques (“Checks” in the USA)
Written instruction to transfer an amount from one account to another
Takes longer
Could be NSF
More secure

6. 10.1 Payment Systems Credit Cards Limited monthly spending limit
Issuer (visa, amex, etc) pays the merchant
You pay the issuer back by the due date
If you don’t pay on time, you pay interest
Relatively safe, very convenient
Some fraud occurs
Some have annual fees

7. 10.1 Payment Systems Debit Cards
Money goes directly from your account to the seller’s account
Need a PIN (please never say “PIN Number”)
Extremely popular, safe, convenient
Some bank accounts charge for debiting

8. 10.1 Payment Systems Direct Transfers
Money goes from one account to another automatically on a set date
Example: My mortgage payment is deducted from my bank account every 2nd Wednesday.. I never actually hand any cash to CIBC (who holds my mortgage)
Goes the other way too – many people are paid by ‘direct deposit’
Example: My employer (GECDSB) never actually gives me cash... Every 15th and 30th my pay is automatically deposited to my bank account

9. 10.2 Accounting for Cash Receipts
Cash Receipts are all the funds taken in from business operations, includes all items considered to be money
Three types listed
Mail receipts
Over-the-counter sales
Cash Register Receipts
Read these paragraphs and understand the appropriate journal entries

10. 10.2 Accounting for Cash Receipts
Preparing Cash Proofs
Change Fund or Float  an amount of money for making change for customers
Created by the business making a cheque out to “cash”
Journal Entry
Cash Float $$$
Bank $$$

11. 10.2 Accounting for Cash Receipts
Cash Proof is an accounting procedure that compares cash receipts according to source documents against cash receipts according to a physical count
i.e. What SHOULD BE there
VS.
What IS there

12. 10.2 Accounting for Cash Receipts
Cash Short or Over
New account created to balance the source document info correctly
If a short then it is a DR
If an over then it is a CR
Don’t just add/subtract the error from the sales amount, this is not accurates

13. 10.3 Accounting for Cash Payments
Businesses often pay by cheque, direct transfer, or cash
Cheques are most popular – helps clear the accounts payable
Cash payments made with “petty cash”

14. 10.3 Accounting for Cash Payments
Petty Cash
A small amount of cash kept in the office to cover small expenses
Establishing the Petty Cash fund
Journal
Petty Cash $$$
Bank $$$

15. 10.3 Accounting for Cash Payments
Operating the Petty Cash Fund
As Cash is removed, bills/vouchers replace
At any time the total of all the cash, bills and vouchers should equal the initial petty cash amount
Do the simulation with play money – described in teachers guide on p86

16. 10.4 Accounting Controls for Cash
An accounting system that promotes employee honesty, accuracy and efficiency is considered to have good internal control
Internal Control – a set of procedures established to protect the assets from theft, waste and ensure accurate accounting data, encourage efficiency and adhere to company policies

17. 10.4 Accounting Controls for Cash
Where possible 2 people should process and prepare accounting documents independently of each other and their work must agree.
The person who records transactions or prepares accounting records should not also control or handle the physical assets.
All assets should be kept in a safe place.

18. 10.4 Accounting Controls for Cash
Only a few key employees should be allowed to approve and authorize transactions.
An independent accountant should periodically carry out an audit to ensure that the accounting system is being followed correctly.
Responsibilities should be clearly established. It should be easy to tell who is responsible for errors or missing assets.

19. 10.4 Accounting Controls for Cash
SEPARATE DUTIES – the people handling the cash should not be the people keeping the records for the cash
DEPOSIT FUNDS DAILY – cash receipts for the day should be deposited by the end of the day
DEPOSIT FUNDS INTACT – cash received during the day should not be available for making payments or for borrowing by employees.

20. 10.4 Accounting Controls for Cash
MAKE ALL PAYMENTS BY CHEQUE OR ELECTRONIC TRANSFER OF FUNDS.
ENDORSE CHEQUES “FOR DEPOSIT ONLY” – then each cheque can only be credited to the business’s bank account and cannot be cashed in any other way
RECONCILE BANK ACCOUNTS MONTHLY – this is a routine procedure to determine why the balance on deposit in the bank does not agree with the balance of cash shown by the books of the company.

21. 10.4 Accounting Controls for Cash
Bank Reconciliation
A routine procedure to determine why the balance on deposit in the bank does not agree with the balance of cash shown by the books of the company
Usually outstanding cheques or late deposits