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Chapter 7-1 Cash Financial Accounting, Fifth Edition.

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Presentation on theme: "Chapter 7-1 Cash Financial Accounting, Fifth Edition."— Presentation transcript:

1 Chapter 7-1 Cash Financial Accounting, Fifth Edition

2 Chapter 7-2 Contributes to good internal control over cash. Minimizes the amount of currency on hand. Creates a double record of bank transactions. Bank reconciliation. Control Features: Use of a Bank

3 Chapter 7-3 Bank Statements Debit Memorandum Bank service charge NSF (not sufficient funds) Illustration 7-7 Credit Memorandum Collect notes receivable. Interest earned. Control Features: Use of a Bank

4 Chapter 7-4 The control features of a bank account do not include: a.having bank auditors verify the correctness of the bank balance per books. b.minimizing the amount of cash that must be kept on hand. c.providing a double record of all bank transactions. d.safeguarding cash by using a bank as a depository. Review Question Control Features: Use of a Bank

5 Chapter 7-5 Reconcile balance per books and balance per bank to their adjusted (corrected) cash balances. Reconciling Items: 1. Deposits in transit. 2. Outstanding checks. 3. Bank memoranda. 4. Errors. Reconciling the Bank Account SO 5 Prepare a bank reconciliation. Control Features: Use of a Bank Time Lags

6 Chapter 7-6 Reconciliation Procedures SO 5 Prepare a bank reconciliation. + Deposit in Transit - Outstanding Checks +/- Bank Errors +Notes collected by bank -NSF (bounced) checks -Check printing or other service charges +/-Book Errors CORRECT BALANCE Illustration 7-8 Control Features: Use of a Bank

7 Chapter 7-7 SO 5 Prepare a bank reconciliation. Control Features: Use of a Bank Advertising expense

8 Chapter 7-8 Illustration: Illustration: Prepare a bank reconciliation at April 30. SO 5 Prepare a bank reconciliation. Cash balance per bank statement $15, Add: Deposit in transit2, Less:Outstanding checks(5,904.00) Adjusted cash balance per bank$12, Cash balance per books $11, Add: Collection of notes receivable1, Error in check No Less:NSF check(425.60) Bank service charge(30.00) Adjusted cash balance per books$12, Control Features: Use of a Bank

9 Chapter 7-9 Cash615.40Apr. 30 Bank fee expense45.00 Accounts receivable Notes receivable1, Interest revenue50.00 SO 5 Prepare a bank reconciliation. Illustration: Illustration: Journalize the adjusting entries at April 30 on the books of Laird Company. Dr.Cr. Advertising expense36.00 Control Features: Use of a Bank

10 Chapter 7-10 The reconciling item in a bank reconciliation that will result in an adjusting entry by the depositor is: a. outstanding checks. b. deposit in transit. c. a bank error. d. bank service charges. Review Question SO 5 Prepare a bank reconciliation. Control Features: Use of a Bank


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