summarizes the projected cash payments and cash receipts
question
voucher system
answer
set of approvals and procedures used to control the acceptance of liabilities and cash payments
question
cash
answer
includes currency and coins along with the amounts on deposit in bank accounts, checking accounts, and many savings accounts
question
Prepare the journal entry to establish the petty cash fund of 210.
answer
dr petty cash 210
cr cash 210
question
Palmona Co. establishes a $210 petty cash fund on January 1. On January 8, the fund shows $125 in cash along with receipts for the following expenditures: postage, $36; transportation-in, $11; delivery expenses, $13; and miscellaneous expenses, $25. Palmona uses the perpetual system in accounting for merchandise inventory.
Record the reimbursement of the petty cash fund.
answer
dr postage expense 36
dr delivery exp 13
dr misc exp 25
dr merch inv 11
cr cash 85
(36+13+11+25=85)
question
Reimburse the petty cash fund and increase it to $260. (was 210 before)
answer
dr petty cash 50
cr cash 50
question
Prepare a bank reconciliation using a company's bank statement and cash account.
answer
UPDATES TO BANK STMT
bank stmt balance: 59,000
additions: deposit in transit = 28,000
deductions: outstanding checks = check 110+check111 = 4900+700=5600 (in the bank
adj bank balance = 59000+28000-5600=81,330
UPDATES TO COMPANY'S BOOKS
book balance: 82190 (from the cash t account)
additions: interest earned = 30 (listed in bank account "other" column)
deductions: nsf check = 840, service charge = 50 (listed in bank account "other" column)
adj book balance: 82190+30-840-50=81,330
both adj balances must match!
question
The three parties involved with a check are:
answer
The maker, the payee, and the bank.
question
Cash equivalents meet all of the following criteria except:
Short-term U.S. treasury bills.
Have a market value that is not sensitive to interest rate changes.
Readily convertible to a known cash amount.
Short-term investments purchased within 3 months of their maturity dates.
More liquid than cash.
answer
More liquid than cash.
question
A voucher system is a set of procedures and approvals:
answer
Designed to control cash payments and the acceptance of liabilities.
question
Cash equivalents:
Are short-term, highly liquid investment assets.
Are recorded in petty cash.
Include 6-month certificates of deposit.
Include money orders.
Include checking accounts.
answer
Are short-term, highly liquid investment assets.
question
The principles of internal control include:
Bond all employees.
Separate recordkeeping from custody of assets.
Use only computerized systems.
Require automated sales systems.
Maintain minimal records.
answer
Separate recordkeeping from custody of assets.
question
Basic bank services do not include:
Petty cash management.
Electronic funds transfer.
Bank accounts.
Bank deposits.
Checking.
answer
Petty cash management.
question
All of the following are considered effective cash management principles except:
Retaining excess cash for unexpected expenditures.
Planning expenditures.
Keeping only necessary assets.
Encouraging collection of receivables by offering discounts for early payments.
Delaying payment of liabilities until the last possible day.
answer
Retaining excess cash for unexpected expenditures.
question
Which of the following is not one of the policies and procedures that make up an internal control system?
Ensure reliable accounting.
Guarantee a return to investors.
Uphold company policies.
Promote efficient operations.
Protect assets.
answer
Guarantee a return to investors.
question
If a company made a bank deposit on September 30 that did not appear on the bank statement dated September 30, in preparing the September 30 bank reconciliation, the company should:
Add the deposit to the book balance of cash.
Deduct the deposit from the September 30 book balance and add it to the October 1 book balance.
Deduct the deposit from the bank statement balance.
Add the deposit to the bank statement balance.
Skip the bank reconciliation this month.
answer
Add the deposit to the bank statement balance.
Explanation:
This is a temporary difference, the bank balance will be adjusted in the bank reconciliation to get the adjusted bank statment.
The deposit is an increase of cash, it will not be deducted. The bank will acknowledge the deposit in 48 or 72 hours so there is no need to send any memo.
question
Preparing a bank reconciliation on a monthly basis is an example of:
answer
Protecting assets by proving the accuracy of cash records.
question
Franklin Company deposits all cash receipts on the day they are received and makes all cash payments by check. At the close of business on August 31, its Cash account shows a debit balance of $13,162. Franklin's August bank statement shows $14,237 on deposit in the bank. Determine the adjusted cash balance using the following information:
Deposit in transit $4,500
Outstanding checks $3,900
Bank service fees, not yet recorded by company $50
The bank collected on a note receivable, not yet recorded by the company $1,725
The adjusted cash balance should be:
answer
14837
(14237+4500-3900)
question
Which of the following events would cause a bank to reduce a depositor's account?
The depositor orders new checks through the bank at a cost of $50.
The bank corrects an error from previous month by adding $75 to the depositor account.
There are outstanding checks drawn on the account at month-end.
There are deposits in transit on the account at month-end.
The bank collects a note receivable and related interest on the depositor's behalf.
answer
The depositor orders new checks through the bank for $50
question
Clayborn Company deposits all cash receipts on the day they are received and makes all cash payments by check. At the close of business on May 31, its Cash account shows a debit balance of $17,025. Clayborn's May bank statement shows $15,800 on deposit in the bank. Determine the adjusted cash balance using the following information:
Deposit in transit $5,200
Outstanding checks $4,600
Bank service fees, not yet recorded by company $25
A NSF check from a customer, not yet recorded by the company $600
The adjusted cash balance should be:
answer
16,400
(15800+5200-4600)
(17025-25-600)
question
If a check correctly written and paid by the bank for $749 is incorrectly recorded in the company's books for $794, how should this error be treated on the bank reconciliation?
answer
Subtract $45 from the book balance.
question
Assume that the custodian of a $450 petty cash fund has $62 in coins and currency plus $383 in receipts at the end of the month. The entry to replenish the petty cash fund will include:
A credit to Cash Over and Short for $5.
A debit to Cash for $378.
A debit to Cash Over and Short for $5.
A credit to Cash for $383.
A debit to Petty Cash for $383.
answer
A credit to Cash for $383. (correct but explanation is wrong)
Total of receipts and coins = $383 + $62 = $445
So, there is a shortage of $5 in the petty cash account
(450-445)
Journal entry to replenish petty cash will be as follows:
dr all receipts for petty cash $383
dr cash over and short $5
cr cash $388
(Being petty cash of $450 replenished with $5 shortage)
question
In the process of reconciling its bank statement for April, Donahue Enterprises' accountant compiles the following information:
Cash balance per company books on April 30: $6,275
Deposits in transit at month-end: $1,300
Outstanding checks at month-end: $620
Bank charge for printing new checks: $45
Note receivable and interest collected by bank on Donahue's behalf: $770
A check paid to Donahue during the month by a customer is returned by the bank as NSF: $480
The adjusted cash balance per the books on April 30 is:
answer
6520
Book balance $ 6,275
+ note collection & interest revenue = 770
- bank charge for printing new checks - 45
- NSF check returned by bank - 480
6275+770-45-480
question
Childers Company, which uses a perpetual inventory system, has an established petty cash fund in the amount of $400. The fund was last reimbursed on November 30. At the end of December, the fund contained the following petty cash receipts:
December 4 Freight charge for merchandise purchased $62
December 7 Delivery charge for shipping to customer $46
December 12 Purchase of office supplies $30
December 18 Donation to charitable organization $51
If, in addition to these receipts, the petty cash fund contains $201 of cash, the journal entry to reimburse the fund on December 31 will include:
answer
A credit to Cash of $199.
question
The following information is available for Montrose Company at December 31:
Cash in bank account $8,540
Petty cash $250
Money market fund balance $10,400
Checks from customers $1,350
NSF checks from customers returned by bank $805
Treasury bill maturing in 60 days $10,000
Money orders $290
A nine-month certificate of deposit maturing on June 30 of next year $ 6,000
Based on this information, the amounts considered Cash and Cash Equivalents, respectively on December 31 are:
answer
Cash $10,430; Cash equivalents $20,400
Explanation:
Cash includes all the currencies in hand or any asset which could be converted to cash instantly.
The assets with high liquidity is included in cash and cash equivalent balance. These assets can be converted into cash very quickly. These assets normally have 90 days or fewer maturity period.
Answer and Explanation:
Cash in bank $8,540
Petty cash $250
Check from customer $1,350
money order $290
Cash $10,430
The check will be clear with 3 to 4 working days, so it has very short maturity period.
Money order can be collected instantly.
Cash = $10,430
Cash Equivalent
Money market fund balance $10,400
Treasury bill maturing in 60 days $10,000
NSF checks from customers returned by bank $805
Certificate of deposit $6,000
Total Cash Equivalent $27,205
Money Market fund balance normally has maturity of 60 or less.
Checks returned by bank can be recollected from customer in a short period.
CD is Maturing in 90 days from December 31.
question
If a check correctly written and paid by the bank for $272 is incorrectly recorded in the company's books for $227, how should this error be treated on the bank reconciliation?
answer
Subtract $45 from the book balance.
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