Post on 17-Feb-2017
Cash
H0032
* Property of STI
Page 1 of 12
CASH
Internal Control
a. Safeguard assets
b. Ensure accurate and reliable accounting
records
c. Promote operational efficiency
d. Encourage adherence to company policies
Internal Control
Administrative
Control vs. Accounting
Control
Cash
H0032
* Property of STI
Page 2 of 12
Effective Systems of Internal Control
1. Competent and reliable personnel
2. Assignment of responsibilities
3. Proper authorization
4. Separation of duties
5. Internal and external audits
6. Documents and records
Cash
H0032
* Property of STI
Page 3 of 12
The Bank Account as a Control Device
Cash
Items recorded by the company but not
yet recorded by the bank.
o Signature Card
o Deposit Ticket
o Check
o Bank Statement
o Bank Reconciliation
• Deposits in transit
• Outstanding Checks
Cash
H0032
* Property of STI
Page 4 of 12
The Bank Account as a Control Device
Items recorded by the bank but not yet
recorded by the company.
Errors
• Bank Collections
• Service Charge
• Interest Revenue on Checking Account
• NSF Checks
• Checks collected, deposited & returned
to payee
• The cost of printed checks
Cash
H0032
* Property of STI
Page 5 of 12
Steps in Preparing a Bank Reconciliation
1. Start with two figures: the bank statement
balance and the balance in the company’s
Cash account.
2. Add to, or subtract from, the bank balance
those items that appear on the books but not
on the bank statement.
3. Add to, or subtract from, the book balance
those items that appear on the bank
statement but not on the company books.
4. Compute the adjusted bank and book balance.
5. Journalize each item in step 3
6. Correct all book errors.
Cash
H0032
* Property of STI
Page 6 of 12
Steps in Preparing a Bank Reconciliation
Feb. 1 Balance 41,950 Feb. 3 Balance 4,000
6 CR 14 8,000 12 CR 14 31,000
15 CR 15 18,000 19 CR 15 11,000
23 CR 15 9,000 25 CR 15 5,000
28 CR 15 24,000 27 CR 15 9,000
Feb. 28 Balance 40,950
Cash
Sample Problem:
Beginning balance ………………………………….………………….. P 41,950
Deposits:
Feb. 7 ………………………………………………… P 8,000
Feb. 15 ……………………………………………….. 18,000
Feb. 24 ……………………………………………….. 9,000 35,000
Less: Checks (total per day):
Feb. 8 ………………………………………………… P (4,000)
Feb. 16 ……………………………………………….. (31,000)
Feb. 23 ……………………………………………….. (11,000) (46,000)
Other items:
Service charge ……………………………………………………… (100)
NSF check from N. F. King ………………………………………. (7,000)
Bank collection of note receivable for the company* …………… 10,000
Interest on account balance ………………………………………. 150
Ending balance ……………………………………………………….. P 34,000
*Includes interest of P1,190.
Bank Statement for February 28, 2005
Cash
H0032
* Property of STI
Page 7 of 12
Steps in Preparing a Bank Reconciliation
Bank:
Balance, Februry 28, 2005 …………………………… P 34,000
Add: Deposit of February 28 in transit ……………… 24,000
P 58,000
Less: Outstanding Checks issued on Feb. 25 & 27.. 14,000
Adjusted bank balance, February 28, 2005 ………… 44,000
Books:
Balance, February 28, 2005 40,950
Add: Bank collection of note receivable, including
interest of P 1,190………………………………………10,000
Interest earned on bank balance ……………… 150
51,100
Less: Service Charge ………………………………… P (100)
NSF check (7,000) (7,100)
Adjusted book balance, February 28, 2005 ………… 44,000
Barn Company
Bank Reconciliation
February 28, 2005
Cash
H0032
* Property of STI
Page 8 of 12
Internal Control Over Cash Receipts
Cash sales
Cash Short and Over
o Cash Register
o Fidelity bond
Cash ……………………………………………..xxx
Cash Short and Over ……………………..xxx
Sales revenue ……………………………………xxx
To record daily cash sales.
Cash
H0032
* Property of STI
Page 9 of 12
Internal Control Over Cash Disbursements
Controlling the cost of inventory
Accounts payable…………………xxx
Purchase Discounts Lost……..xxx
Cash ………………………………………..xxx
Purchases………………………..……….xxx
Accounts payable …………………………xxx
Sales Revenue ………………………………… P 7,000,000
Cost of Goods Sold …………………………... 3,800,000
Gross Margin…………………………………… 3,200,000
Operating Expenses ………………………….. 2,300,000
Income from Operations ………………………. 900,000
Other revenue/expense:
Purchase discounts lost …………………. (20,000)
Net Income …………………………………….. P 880,000
Income Statement
For the year ended December 31, 2005
Garcia Marketing
Cash
H0032
* Property of STI
Page 10 of 12
Petty Cash Disbursements
Controls over Petty Cash:
1. Designate an employee to administer the
fund as its custodian.
2. Keep a specific amount of cash on hand.
3. Support all fund disbursements with a
petty cash ticket
4. Replenish the fund
Cash
H0032
* Property of STI
Page 11 of 12
Voucher System
The Voucher System uses:
1. Vouchers
2. Voucher Register
3. Unpaid Voucher file
4. Check Register
5. Paid Voucher File
Business
Document
Prepared By Sent To
Purchase request Sales
department
Purchasing
department
Purchase order Purchasing
department
Supplier or
vendor
Invoice Supplier or
vendor
Accounting
department
Receiving report Receiving
department
Accounting
department
Voucher Accounting
department
Officer who signs
the check
Cash
H0032
* Property of STI
Page 12 of 12
Voucher System
The Voucher System:
The accounting department prepares a voucher.
Supporting documents are compared in the
accounting department.
Designated officials examine the supporting
documents and approve the voucher.
Accounting department enters the voucher
payable in the voucher register
Prior to invoice due date, a check is issued to
pay the voucher.
Accounting department enters the voucher in
the check register and update the voucher.
Paid vouchers are canceled and filed.