Exam 6: Reporting and Analyzing Cash and Internal Controls

The following information is available for the Topper Company for the month of July. a. On July 31, after all transactions have been recorded, the balance in the company's Cash account has a balance of $15,244. b. The company's bank statement shows a balance on July of $16,450. c. Outstanding checks at July total $2,063. d. A credit memo included with the bank statement indicates that the bank collected $570 on a note receivable for Topper. The $570 includes $550 principle and $20 interest. e. A debit memo included with the bank statement shows a $107 NSF check from a customer, P. Flank. f. A deposit placed in the bank's night depository on July 31 totaling $1,275 did not appear on the bank statement. g. Included with the bank statement was a debit memorandum in the amount of $45 for check printing charges that have not been recorded on the company's books. Prepare the July bank reconciliation for the Topper Company.

The impact of technology on internal controls includes:

Following are seven items a through g that would cause Rembrandt Company's book balance of cash to differ from its bank statement balance of cash. a. A service charge imposed by the bank. b. A check listed as outstanding on the previous period's reconciliation and still outstanding at the end of this month. c. A customer's check returned by the bank is marked "Not Sufficient Funds (NSF)". d. A deposit mailed to the bank on the last day of the current month and not recorded on this month's bank statement. e. A check paid by the bank at its correct $190 amount recorded in error in the company's check register at $109. f. An unrecorded credit memorandum indicating that bank collected a note receivable for Rembrandt Company and deposited the proceeds in the company's account. g. A check written in the current period that is not yet paid or returned by the bank. Indicate where each item, letters a-g, would appear on Rembrandt Company's bank reconciliation by placing its identifying letter in the parentheses in the proper section of the form below.

A voucher system is a set of procedures and approvals designed to control cash disbursements and the acceptance of obligations.

Describe a petty cash account and its purpose.

Rosemond Company establishes a $300 petty cash fund on September 9. On September 30, the fund shows $54 in cash along with receipts for the following expenditures: office supplies, $40; postage expenses, $123; and miscellaneous expenses, $80. The petty cashier could not account for a $3 shortage in the fund. The September 30 entry to reimburse the fund is.

Basic bank services such as bank accounts, bank deposits, and checking contribute to the control of cash.

A(n) ____________________________ refers to the policies and procedures managers use to protect assets, ensure reliable accounting, promote efficient operations, and urge adherence to company policies.

A properly designed internal control system:

If the petty cashier fails to get a receipt for a payment or overpays for the amount due, the shortage in the account is debited to the Cash Over and Short account.

Petty cash reimbursement requires a journal entry that involves a debit to the appropriate expenses and a credit to Cash.

Liquidity refers to a company's ability to pay its long-term obligations.

Discuss how the principles of internal control apply to cash receipts through the mail by giving several examples of good control measures that should be implemented.

The entry to increase the balance in petty cash from $50 to $75 would include a credit to Petty Cash of $25.

The document the purchasing department sends to the vendor that is used to place an order is the __________________________.

If a check that was outstanding on last period's bank reconciliation was not among the cancelled checks returned by the bank this period, in preparing this period's reconciliation, the amount of this check should be:

When a petty cash fund is in use:

During the month of July, Clanton Industries issued a check in the amount of $845 to a supplier on account. The check did not clear the bank during July. In preparing the July 31 bank reconciliation, the company should:

Meng Co. establishes a $250 petty cash fund on January 1. On January 8, the fund shows $68 in cash along with receipts for the following expenditures: postage, $74; transportation-in, $49; and miscellaneous expenses, $59. Meng uses the perpetual system in accounting for merchandise inventory. If Meng decides to increase the Petty Cash fund to $300 on January 15, the journal entry is:

A company's internal control system: