Accounting 210 Chapter 8 Review

Summarize the steps in a voucher system.

1. A purchase requisition is filled out and placed in voucher 2. A purchase order is completed and a copy is placed in voucher 3. A receiving report is completed when the order arrives and placed in voucher 4. The accounting department approves payment of the invoice and approval is placed in voucher 5. The cashier issues a check for the amount of the invoice

In preparing a monthly bank reconciliation, a business follows several steps. What are the correct steps to a bank reconciliation?

1. Identify the bank statement balance. Add any deposits in transit and subtract any outstanding checks 2. Compute the adjusted bank balance 3. Identify the company's book balance 4. Add any unrecorded credit memoranda from the bank, interest earned, and errors understating the book balance 5. Identify and list any unrecorded debit memoranda from the bank, service charges, and errors overstating the book balance 6. Compute the adjusted book balance and compare it to the adjusted bank balance to verify equality

What are reasons management uses internal controls?

1. Protect assets 2. Promote efficient operations 3. Ensure reliable accounting 4. Uphold company policies

What is a check?

A document signed by the depositor instructing the bank to pay a specified amount of money

What is a bank account?

A record set up by the bank for a customer

What is a bank reconciliation?

A report explaining any differences between the checking account balance according to the depositor's records and the balance reported on the bank statement

What is the Cash Short and Over account?

An income statement account that records the effects of cash overages and cash shortages and reflects expenses as debit balances

What is a voucher?

An internal document used to accumulate information to control cash disbursements and to ensure that a transaction is properly recorded

What is the adjusting entry needed to record a $1000 note receivable collected by the bank less the expense of having the bank perform the service ($30)?

Debit cash $970 Debit collection expense $30 Credit note receivable $1000

Jackson Co. needs to replenish its petty cash fund. Currently, it contains $11 in cash and receipts for supplies of $40 and delivery expenses of $49. The fund was initially established with $100. Record the journal entry to replenish the account.

Debit delivery expense $49 Debit supplies expense $40 Credit cash $89

What is remittance advice?

Explains the reason for payment

What is the difference between human error and human fraud?

Human error is related to misjudgment or confusion Human fraud involves intent to defeat internal controls for personal gain

Why is a petty cash fund used?

It is used for small payments in order to avoid the time and cost of writing checks for small amounts

A depositor's account is a(n) _____ on the bank's records, but it is a(n) _____ on the books of the account owner. Because of this, every time the account owner makes a deposit, the bank _____ the account owner's account.

Liability Asset Credits

What is a deposit ticket?

Lists currency, coins, and checks deposited into an account

What items would cause the bank statement balance to differ from the depositor's book balance? 1. Bank service charge 2. Deposit in transit 3. Cleared checks 4. NSF check 5. Interest paid by bank 6. Outstanding checks 7. Supplies expense

NSF check Deposit in transit Interest paid by bank

What is an electronic funds transfer?

The electronic transfer of cash from one party to another