1. Cash Funds Making Accounting Relevant In the workplace, many people handle cash. Protecting cash from theft or loss is important. Making Accounting Relevant In the workplace, many people handle cash. Protecting cash from theft or loss is important. If you were the owner of a business, what measures would you take to protect cash?

2. Section 1The Change Fund What You’ll Learn  Why a business needs to have a small amount of cash on hand.  How to record the entry to establish a change fund.  How to prove the cash in the cash register drawer at the end of each business day. What You’ll Learn  Why a business needs to have a small amount of cash on hand.  How to record the entry to establish a change fund.  How to prove the cash in the cash register drawer at the end of each business day.

3. Why It’s Important Retail businesses that use a cash register need to maintain controls over the change fund and to account for cash shortages and overages. Why It’s Important Retail businesses that use a cash register need to maintain controls over the change fund and to account for cash shortages and overages. Key Terms  change fund Key Terms  change fund Section 1The Change Fund (cont'd.)

4. Establishing a Change Fund  used to make change in cash transactions. Section 1The Change Fund (cont'd.) Business Transaction On May 1, the accountant for On Your Mark wrote Check 2150 for $100 to establish a change fund. ANALYSIS Identify1.The accounts affected are Change Fund and Cash in Bank. Classify2.Both Change Fund and Cash in Bank are asset accounts. + / –3.Change Fund is increased by $100. Cash in Bank is decreased by $100.

5. Establishing a Change Fund (cont'd.) Section 1The Change Fund (cont'd.) Business Transaction (cont'd.) On May 1, the accountant for On Your Mark wrote Check 2150 for $100 to establish a change fund. DEBIT-CREDIT RULE 4.Increases to asset accounts are recorded as debits. Debit Change Fund for $100. 5.Decreases to asset accounts are recorded as credits. Credit Cash in Bank for $100.

6. Establishing a Change Fund (cont'd.) Section 1The Change Fund (cont'd.) Business Transaction (cont'd.) On May 1, the accountant for On Your Mark wrote Check 2150 for $100 to establish a change fund. T ACCOUNTS 6. ChangeCash in FundBank Debit + 100 Debit + Credit – Credit – 100

7. Establishing a Change Fund (cont'd.) Section 1The Change Fund (cont'd.) Business Transaction (cont'd.) On May 1, the accountant for On Your Mark wrote Check 2150 for $100 to establish a change fund. JOURNAL ENTRY 7.

8. Using the Change Fund  Change fund is put into the cash register drawer at the beginning of the day.  A cash proof is prepared to verify that the amount of cash in the drawer equals the total cash sales for the day plus the change fund.  The amount of cash in the change fund is set aside for use as change for the next day.  Change fund is put into the cash register drawer at the beginning of the day.  A cash proof is prepared to verify that the amount of cash in the drawer equals the total cash sales for the day plus the change fund.  The amount of cash in the change fund is set aside for use as change for the next day. Section 1The Change Fund (cont'd.)

9. Recording Cash Short and Over  The amount of cash either gained or lost because of errors is recorded in the Cash Short & Over account.  Cash Short & Over is a temporary account.  The Cash Short & Over account does not have a normal balance.  The amount of cash either gained or lost because of errors is recorded in the Cash Short & Over account.  Cash Short & Over is a temporary account.  The Cash Short & Over account does not have a normal balance. Section 1The Change Fund (cont'd.) Cash Short & Over Debit Cash Shortages Credit Cash Overages

10. Check Your Understanding Suppose a salesclerk makes an error and gives an incorrect amount of change to a customer. Explain how this error is recorded in the accounting records. Section 1The Change Fund (cont'd.)