ACT 101 Chapter 9 Cash Receipts, Cash Payments, and Banking Procedures
Entries to record payments of taxes, refunds and purchases of equipment are recorded in the cash payment journal under the column headings:
Other accounts debit, cash credit
Which of the following are internal controls related to cash receipts:
bank reconciliation should be completed by an employee not responsible for cash receipts, keep cash receipts in a locked register, safe or drawer. Cash receipts should always be recorded promptly.
Bonding
The process by which employees are investigated by an insurance company that will insure the business against losses through employee theft or mishandling funds.
Service charge
A fee charged by a bank to cover the costs of maintaining accounts and providing services.
Negotiable
A financial instrument whose ownership can be transferred to another person or business.
Deposit slip
A form prepared to record the deposit of cash or checks to a bank account.
Statement of account
A form sent to a firm's customers showing transactions during the month and the balance owed.
Credit memorandum (banking)
A form that explains any addition, other than a deposit, to a checking account.
Debit memorandum
A form that explains any deduction, other than a check or other electronic payment transaction, from a checking account
Petty cash voucher
A form used to record a payment made from a petty cash fund.
Petty cash analysis sheet
A form used to record transactions involving petty cash.
Blank endorsement
A signature of the payee written on the back of the check that transfers ownership of the check without specifying to whom or for what purpose.
Restrictive endorsement
A signature that transfers a check to a specific party for a stated purpose.
Full endorsement
A signature transferring a check to a specific person , firm, or bank
Cash receipts journal
A special journal used to record and post transactions involving the receipt of cash, simplifies the recording of transactions and eliminates repetition in posting. Has separate columns for the accounts frequently used when recording cash receipts. There are columns for Debits to cash, Credits to accounts receivable for payments received on account, and credits to sales and sales tax payable for cash sales. At the end of the month,the totals of these columns are posted to the general ledger.
Petty cash fund
A special-purpose fund used to handle payments involving small amounts of money such as postage stamps, delivery charges, and minor purchases of office supplies.
Bank reconciliation statement
A statement that accounts for all differences between the balance on the bank statement and the book balance of cash.
Cash register proof
A verification that the amount of currency and coins in a cash register agrees with the amount shown on the cash register audit tape. Also used to record cash sales and sales tax in the cash receipts journal. The currency and coins are deposited in the firm's bank.
Endorsement
A written authorization that transfers ownership of a check.
Check
A written order signed by an authorized person instructing a bank to pay a specific sum of money to a designated person or business.
The individual entries from the cash receipts journal are posted to the ---- ledger, to update all customer balances.
Accounts Receivable
Cash payments journal
A special journal used to record transactions involving the payment of cash. Separate columns for the frequently used when recording cash payments Cash, Accounts Payable, and Purchases Discounts. At the end of the month, the totals of these columns are posted to the general ledger.
Postdated check
A check dated some time in the future.
Canceled check
A check paid by the bank on which it was drawn.
Dishonored check
A check returned to the depositor unpaid because of insufficient funds in the drawer's account; also called an NSF check.
Purchases Discounts
A contra cost of goods sold account that appears in the Cost of Goods Sold section of the income statement. Purchases discounts are subtracted from purchases to obtain net purchases. A cash discount offered to the customer for payment within a specified period will be recorded by the customer in this account.
Deposit in transit
A deposit that is recorded in the cash receipts journal but that reaches the bank too late to be shown on the monthly bank statement.
Cash Short or Over account
An account used to record any discrepancies between the amount of currency and coins in the cash register and the amount shown on the audit tape. If the account has a credit balance, there is an overage, which is treated as revenue. If the account has a debit balance, there is a shortage, which is treated as an expense.
Electronic funds transfers (EFT)
An electronic transfer of money from one account to another.
Periodic Inventory system
An inventory system which is updated based on a physical inventory count.
A company established a $100 petty cash fund. This transaction requires the following entries in the cash payments journal entries in the:
Cash credit column, and other accounts debit column, note petty cash fund.
A company established a $100 petty cash fund. This transaction requires the following entries in the cash payments journal entries in the:
Cash credit column, other accounts debit column, note petty cash fund.
Which of the following are internal controls related to cash receipts:
Cash receipts should always be recorded promptly. Bank reconciliation should be completed by an employee not responsible for cash receipts. Keep cash receipts in a locked register, safe, or drawer.
A check stub records which of the following:
Check amount Date Payee Purpose Balance
Outstanding checks
Checks that have been recorded in the cash payments journal but have not yet been paid by the bank
A company issued a check to replenish its petty cash fund. An analysis of payments from the fund showed only one payment: Delivery Expense, $50. This transaction would be recorded in the cash payments journal with:
Credit to cash, Debit to delivery expense.
A company purchases $3,000 of equipment by signing a twelve-month note payable with an interest rate of 10% will be recorded with a:
Credit to notes payable for $3,000.
When a promissory note is used to replace an outstanding accounts receivable balance, the entry to record this transaction requires a ---- to accounts receivable and a --- to notes receivable
Credit, debit
How often should the amounts from the Accounts Payable Debit column of the cash payments journal be posted to the individual accounts in the Account Payable subsidiary ledger?
Daily
A company purchases $5,000 of equipment by signing a 12 month note payable with an interest rate of 5%. This transaction will be recorded with a:
Debit to equipment for $5,000, and credit to notes payable for $5,000.
items found on the first section of the bank reconciliation, or adjustments to the bank statement balance include:
Deposits in transit, and outstanding checks.
Items found on the second section of the bank reconciliation, or adjustments to the book balance include:
Deposits not recorded, and errors in the books.
Entries to record receipts of cash from additional owner investments are usually recorded in the cash receipts journal under the column heading
Other accounts credit
Cash
In accounting, currency, coins, checks, money orders, and funds on deposit in a bank. Most cash transactions involve checks.
Good internal control of banking activities include:
Limiting access of the checkbook to designated employees. Using Prenumbered checks.
The following accounts are used as typical column headings on a petty cash analysis.
Miscellaneous expense debit, supplies debit, and delivery expense debit.
Advantages of using a cash payments journal include:
Saves time and effort when recording cash payments, and improves the audit trail.
Promissory note
Sometimes used by businesses to extend credit for a sales transaction.
Drawee
The bank on which a check is written.
Drawer
The person or firm issuing a check.
Payee
The person or firm to whom a check is payable.
