1. Cash Control Systems Chapter 7

2. Why use checks instead of cash? Cash is easily transferred from one person to another without question of ownership. Cash may easily be lost. Checks provide written evidence of to support accounting records.

3. Writing Checks

4. Terms to know Checking account: a business form ordering a bank to pay cash from a bank account. Bank statement: a report of deposits, withdrawals, and bank balance sent to a depositor. ▫Example on page 141

5. Bank Statement Info. Statement Balance Amount of Deposits # of deposits Amount of checks # of checks Previous balance Account # Personal Information

6. Terms to know Outstanding checks: checks that are written but have not yet been processed by the bank. Outstanding deposits: deposits that have been made but not yet reported on bank statement.

7. Why do you need a bank statement? Check the accuracy of statement… ▫Bank statement needs to match your records ▫Checks processed ▫Deposits processed ▫Account balance ▫Withdrawal If errors exist, notify bank immediately.

8. Why might bank statement differ from your records? Service charge Outstanding checks Outstanding deposits Mathematical errors Error by the bank

9. Endorsements Endorsement: a signature or stamp on the back of a check. ▫Blank endorsement ▫Special endorsement ▫Restrictive endorsement

10. Blank Endorsement Consists only of the endorser’s signature. If lost or stolen, can be cashed by anyone who has it. Should only use when at the bank ready to cash the check.

11. Special Endorsement Indicates the new owner of the check. Also known as Full Endorsement. Includes the words “pay to the order of” Only the person or business named can cash, deposit, or further transfer ownership of the check.

12. Restrictive Endorsement Restricts further transfer of a check’s ownership. Limits the use of check to designate purpose.

13. Dishonored Check Definition: a check that a business refuses to pay. Why would a bank not cash a check? ▫Check appears to be altered. ▫Signature of the person who signed the check doesn’t match that on signature card. ▫Amounts in figures and numbers do not agree. ▫Check is postdated. ▫The person who wrote the check has stopped payment. ▫The account of the person who wrote the check has insufficient funds.

14. Petty Cash An amount of cash kept on hand for making small payments. Writing a check may not always be efficient. Small payment may differ depends on the business. Petty Cash is an ASSET

15. Petty Cash Establish a Petty Cash Fund… ▫Transaction: Paid cash to establish a petty cash fund, $200. Check No. 13 ▫Two accounts used: Petty Cash and Cash ▫Petty Cash increases, so Debit ▫Cash decreases, so Credit

16. Petty Cash Every time a small payment is made, a form is prepared to show the purpose and amount of the payment…petty cash slip. Information to complete petty cash slip (p.151)… ▫Petty cash slip # ▫Date of cash payments ▫To whom the cash is paid ▫Reason for the payment ▫Amount paid ▫Account in which amount is to be recorded ▫Signature of person approving petty cash payment

17. Petty Cash No entries are made in the journal for individual petty cash payments. The petty cash slips are kept in the petty cash box until the fund must be replenished. ▫Company can decide at which amount it decides to replenish the fund. ▫Fund is always replenished at the end of the month.