1. Accounting Principles, Ninth Edition
Chapter 8
Fraud, Internal
Control and Cash
Accounting Principles, Ninth Edition

2. Cash Controls Cash Disbursements Controls
Petty Cash Fund - Used to pay small amounts.
Involves:
establishing the fund,
making payments from the fund, and
replenishing the fund.
SO 5 Describe the operation of a petty cash fund.

3. Cash Controls
Illustration: If Laird Company decides to establish a $100 fund on March 1, the journal entry is:
Mar. 1
Petty cash 100
Cash 100
Question 2-19 (textbook) No, Jim is not correct . The proper sequence is as follows :
( b ) Business transaction occurs.
( c ) Information entered in the journal.
( a ) Debits and credits are posted to the ledger.
( e ) Trial balance is prepared.
( d ) Financial statements are prepared.
SO 5 Describe the operation of a petty cash fund.

4. Cash Controls
Illustration: Assume that on March 15 Laird’s petty cash custodian requests a check for $87. The fund contains $13 cash and petty cash receipts for postage $44, freight-out $38, and miscellaneous expenses $5. The general journal entry to record the check is:
Mar. 15
Postage expense 44
Freight-out 38
Question 2-19 (textbook) No, Jim is not correct . The proper sequence is as follows :
( b ) Business transaction occurs.
( c ) Information entered in the journal.
( a ) Debits and credits are posted to the ledger.
( e ) Trial balance is prepared.
( d ) Financial statements are prepared.
Miscellaneous expense 5
Cash 87
SO 5 Describe the operation of a petty cash fund.

5. Cash Controls
Illustration: Occasionally, the company may need to recognize a cash shortage or overage. Assume that Laird’s petty cash custodian has only $12 in cash in the fund plus the receipts as listed. The request for reimbursement would, therefore, be for $88, and Laird would make the following entry:
Mar. 15
Postage expense 44
Freight-out 38
Question 2-19 (textbook) No, Jim is not correct . The proper sequence is as follows :
( b ) Business transaction occurs.
( c ) Information entered in the journal.
( a ) Debits and credits are posted to the ledger.
( e ) Trial balance is prepared.
( d ) Financial statements are prepared.
Miscellaneous expense 5
Cash over and short 1
Cash 88
SO 5 Describe the operation of a petty cash fund.

6. Control Features: Use of a Bank
Contributes to good internal control over cash.
Minimizes the amount of currency on hand.
Creates a double record of bank transactions.
Bank reconciliation.
SO 6 Indicate the control features of a bank account.

7. Control Features: Use of a Bank
Illustration 8-8
Making Bank Deposits
Authorized employee should make deposit.
Bank Code Numbers
Reverse Side
Front Side
SO 6 Indicate the control features of a bank account.

8. Control Features: Use of a Bank
Writing Checks
Written order signed by depositor directing bank to pay a specified sum of money to a designated recipient.
Illustration 8-9
Maker
Payee
Payer
SO 6 Indicate the control features of a bank account.

9. Control Features: Use of a Bank
Illustration 8-10
Bank Statements
Debit Memorandum
Bank service charge
NSF (not sufficient funds)
Credit Memorandum
Collect notes receivable.
Interest earned.
SO 6 Indicate the control features of a bank account.

10. Review Question Control Features: Use of a Bank
The control features of a bank account do not include:
having bank auditors verify the correctness of the bank balance per books.
minimizing the amount of cash that must be kept on hand.
providing a double record of all bank transactions.
safeguarding cash by using a bank as a depository.
SO 6 Indicate the control features of a bank account.