Exam 8: Internal Control and Cash

Match each item to a bank statement adjustment, a company books adjustment, or either. -NSF check

Why would a bank require a company to maintain a compensating balance?

A voucher is a form on which is recorded pertinent data about a liability and the particulars of its payment.

"To maintain public confidence and trust in the financial reporting of companies" is the purpose of

List and define each of the five elements of internal control.

Match each item to a bank statement adjustment, a company books adjustment, or either. -Deposit in transit

A debit or credit memo describing entries in the company's bank account may be enclosed with the bank statement. An example of a credit memo is

The bank statement for Gatlin Co. indicates a balance of $7,735 on June 30. After the journals for June had been posted, the cash account had a balance of $4,098.? (a)Cash sales of $742 had been erroneously recorded in the cash receipts journal as $724. (b)Deposits in transit not recorded by bank, $425. (c)Bank debit memo for service charges, $35. (d)Bank credit memo for note collected by bank, $2,475 including $75 interest. (e)Bank debit memo for $256 NSF (not sufficient funds) check from Janice Smith, a customer. (f)Checks outstanding, $1,860.?Record the appropriate journal entries that would be necessary for Gatlin Co.

On August 3, Sonar Sales decides to establish a $275 petty cash fund to relieve the burden on Accounting.? (a) Journalize the establishment of this fund. (b) On August 11, the petty cash fund has receipts for mail and postage of $124.75, contributions and donationsof $53.25, meals and entertainment of $63.85, and $32.75 in cash. Journalize the replenishment of the fund. (c) On August 12, Sonar Sales decides to increase petty cash to $400. Journalize this transaction.

Present entries to record the following transactions: (a)Established a petty cash fund of $235. (b)The petty cash fund now has a balance of $42.80. Replenished the fund, based on the following disbursements as indicated by a summary of the petty cash receipts: office supplies, $74.50; miscellaneous administrative expense, $92.75; and miscellaneous selling expense, $18.60. (c)Increased the petty cash fund to $300.

Sarbanes-Oxley's purpose is to maintain public confidence and trust in the financial reporting of companies.

If the balance in Cash Short and Over at the end of a period is a credit, it indicates that cash shortages have exceeded cash overages for the period.

Expenditures from a petty cash fund are documented by a petty cash receipt.

Gunnar Company gathered the following reconciling information in preparing its September bank reconciliation. Calculate the adjusted cash balance per books on September 30.? Cash balance per books, September 30 \ 2,750 Deposits in transit 200 Notes receivable and interest collected by bank 630 Bank charge for check printing 50 Outstanding checks 1,250 NSF check 290

Most companies that have several bank accounts, petty cash, and cash on hand would list each separately on the balance sheet.

The portion of an invoice that is returned with payment is a

The petty cash fund eliminates the need for a bank checking account.

The following data are from Autumn Company for the past four years.?? ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~{ \text { Year Ending December } \mathbf { 3 1 } }\\ \begin{array} { | l | c | c | c | c | } \hline & \text { Year 1 } & \text { Year } 2 & \text { Year } \mathbf { 3 } & \text { Y ear } \mathbf { 4 } \\ \hline \text { Cash and cash equivalents } & \$ 23,788 & \$ 45,776 & \$ 52,899 & \$ 82,744 \\ \hline \text { Cash flow from operations } & ( 32,556 ) & ( 47,880 ) & ( 32,357 ) & ( 16,450 ) \\ \hline \end{array} Calculate the following: Year Ending December 31 Year 1 Year 2 Year 3 Year 4 Monthly cash expenses Ratio of cash to monthly cash expenses

Two features of internal control are presented in the following sections. Each is followed by a list of four irregularities that occurred in processing data. Identify the one irregularity from each list that would be discovered or prevented by the feature of internal control described. (a)The sum of the balances of the accounts in the customer's ledger is compared at the end of each month with the balance of the accounts receivable account in the general ledger by a person who has no responsibility for maintaining either the general ledger or the customers ledger. (1)Five hours of services were rendered but the customer was only billed for four hours. (2)A cash receipt of $750 was recorded correctly in the accounts receivable controlling account but was posted to the customer's ledger as $75. (3)A bill for services rendered to Cole Co. was erroneously posted to the account of Coleman Co. in the customer's ledger. (4)No entry was made in the accounting records for services rendered to a customer. (b)Both cash and credit charges for services rendered are recorded on prenumbered invoices. At the end of the day, all invoices are accounted for before the duplicate copies of the invoices are routed to the Accounting Department for entry into the accounts and the cash is sent to the Cashier's Department for deposit. (1)Some charge customers complained that the monthly statements of account did not add all amounts correctly. (2)Some clerks used incorrect hourly rates in preparing invoices. (3)Some clerks destroyed duplicate copies of cash invoices and misappropriated the cash. (4)Some charge customers complained that the monthly statement of account did not indicate credits for payments made.

For each of the following, explain whether the issue would require you to prepare a journal entry for your company, assuming any original entry is correct. If an entry is required, please include it as part of your answer. (1) The bank recorded your deposit as $91 rather than the actual amount of $191. (2) Two outstanding checks amounted to $450. (3) Company Check No. 538 for postage was recorded incorrectly by the company bookkeeper as $50 instead of $59. (4) The bank paid a check for $500 after the company had issued a stop payment and voided the check. (5) An EFT deposit was made by one of the company's customers, Atlas Design, for merchandise received. Thesale had previously been recorded when shipped and was equal to the payment amount of $125.