Chapter 6: Concept Videos

The following information is available for the Maribel Company for the month of June: * The unadjusted balance of the company's Cash account was $26,620 at the end of June. * The bank statement shows a balance on June 30 of $26,960. * Outstanding checks totaled $4,000 at June 30. * Deposit in transit totaled $3,000 on June 30. * The bank statement included a credit memorandum in the amount of $150 for interest. * Check #1221 (in payment of account payable) was written for $4,900, but recorded in the accounting records as $4,090. The adjusted bank and book balance is:

$25,960

Sarbanes-Oxley Act requires each of the following:

* An effective internal control. * Auditors must evaluate internal controls. * Auditor's work overseen by Public Accounting Board

The listing of cash received via mail should be sent to each of the following individuals:

* Cashier * Recordkeeper * Mail cleark

An internal control system is used to do all of the following:

* Protect assets * Ensure reliable accounting

Select the items below which must be adjusted to the book balance:

* deposits in transit * book error * bank error * outstanding checks * interest earned on checking account * collections of accounts receivable by the bank

Steps in Preparing Bank Reconciliation:

1. Identify the bank statement balance. 2. Identify and add unrecorded deposits to the bank balance. 3. Identify and deduct outstanding checks from the bank balance. 4. Compute the adjusted bank balance. 5. Identify the company's book balance. 6. Identify and add unrecorded interest earned to the book balance. 7. Identify and deduct service charges from the book balance. 8. Compute the adjust book balance. 9. Verify that the bank statment balance and the book balance are equal.

Use of cash registers, time clocks, and personal identification scanners to improve internal control.

Apply technological controls

Signed by the depositor instructing the bank to pay a specified amount of money to a designated recipient.

Check

List items such as currency and checks along with their dollar amounts.

Deposit ticket

The work of one person acts as a check on another person to prevent fraud and errors.

Divide responsibilities

A transfer of cash from one party to another that does not involve a paper document.

Electyronic funds transfer

Responsibility for a task should be clearly established and assigned to one person.

Establish responsibilities

On February 1, Derrick Company establishes a $200 petty cash fund. Complete the seller's necessary journal entry by selecting the account names and dollar amounts from the drop-down menus.

February 1 D - Petty Cash $200 C - Cash $200

Recall on February 1, Derrick Company established a $200 petty cash fund. On February 15, when the fund balance reached $7, the petty cash custodian prepared a petty cash report that summarized receipts for postage ($140) and printing ($54). Complete the seller's necessary journal entry by selecting the account names and dollar amounts from the drop-down menus.

February 1 D - Printing Expense $54 D - Postage Expense $140 C - Cash over and short $1 C - Cash $193

The company's bank reconciliation at June 30 included the following item. The bank statement included a credit memorandum in the amount of $150 for interest. Complete the necessary journal entry by selecting the account names and dollar amounts from the drop-down menus.

June 1 D - Cash $150 C - Interest Revenue $150

Use of detailed records to help prevent loss of assets.

Maintain adequate records.

Internal control weaknesses in a business.

Opportunity

Financial, family, and societal stresses to succeed.

Pressure

Employees justifying fraudulent behavior.

Rationalization

At the end of business on September 1, the total displayed on the cash register tape shows $1,059 of cash sales for the day. However, when the clerk and the supervisor count the cash in the register, the count reveals that $1,050 was actually collected from customers. Complete the following journal entry by selecting the account names from the drop-down menus and entering the dollar amounts in the debit or credit columns.

September 1 D - Cash $1050 D - Cash over and short $9 C - Sales $1059

Used by bank employees to verify signatures on checks.

Signature card

All of the following statements regarding a voucher system are incorrect except

an invoice approval initiates the recording of a purchase.

Which of the following is a correct statement regarding control of over-the-counter cash receipts:

The supervisor should compare the register transactions with the cash receipts report to make sure that both are correct.

A bank issues a debit memorandum to notify a depositor of:

a deduction to a depositor's account

Most large thefts in a company come from payments of:

fictitious invoices

All of the following are examples of cash except:

short-term investments