ACCY112 Spring 2013-Week 3

2.

Questions: DQ10.2; EQ10.5; EQ10.10; EQ10.11; PQ10.4 Many people think of cash as coins and notes. In accounting cash has a broader meaning. What type of assets are defined as cash in accounting? In accounting the type of assets defined as cash include money, duplicates of credit card and Electronic Funds Transfer at Point of Sale (EFTPOS) sales, and any other negotiable instrument, such as a cheque or postal note, that a bank or financial institution will normally accept as a deposit to an account.

Exercise 10.5

Cash internal control procedures

Required: Complete the table by inserting in at least one example of how each principle is applied in the control of cash receipts and cash payments.

Internal Control Principle

Physical controls Mechanical/electronic controls Separation of record keeping and custodianship Clear lines of authority Division of responsibilities

Cash Receipts
Using of a safe for cash held on premises and a night safe Cash registers EFTPOS equipment Persons handling cash do not do banking or record receipts Only designated persons act as cashiers Opening of mail receipts by one person is supervised by another

Cash Payments
Using safe to store unused cheque forms Using cheque writing machines Persons signing cheques not involved in recording payments Designated persons authorise payments and sign cheques Persons who authorise payments do not sign cheques

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Exercise 10.10

Petty cash fund transactions

DAVID AND IRENE, INSURANCE AGENTS

Required A. Show the cash payments journal entry that was made to establish the petty cash fund on 1 July. B. Show the cash payments journal entry needed on 31 July to reimburse the petty cash fund (cheque no. 883). (Taxi and newspaper expenditures should be charged to Sundry Expenses.) C. Assume that a decision was made to increase the petty cash fund to $400 from 1 August (cheque no. 894). Show the cash payments journal entry to do so. D. Prepare a petty cash book, with appropriate analysis columns, to incorporate the transactions of the fund.

A. B. and C. Cash Payments Journal Account Cheque No. 432 Post Ref. Accounts Payable GST Outlays Payable Other Discount Received Cash at Bank 300.00

A. B.

Petty Cash Stationery Expense Office Supplies Exp. Accounts Receivable Refund Sundry Expenses

300.00

5.00 9.00 4.00 5.00 23.00

50.00 90.00 40.00 50.00 230.00 100.00

883 C. Petty Cash 894

253.00 100.00

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D. DAVID AND IRENE, INSURANCE AGENTS Petty Cash Book

Date July 1 7 13 20 23 28 Particulars Cheque 432 Office Supplies Stationery Newspapers Customer refund Taxi fare 214 215 216 217 218 Vch No. Receipts 300.00 99.00 55.00 33.00 44.00 22.00 253.00 31 Balance c/d 300.00 Aug 1 Balance b/d Reimburseme nt Chq. 883 1 Increase to fund Chq. 894 47.00 253.00 100.00 47.00 300.00 50.00 90.00 40.00 40.00 20.00 50.00 50.00 30.00 90.00 9.00 5.00 3.00 4.00 2.00 23.00 Payments Stationer y Expense Office Supplies Account Receivable Sundry Expenses GST Outlays

Exercise 10.11
Required:

Budgeted cash receipts from sales, excluding GST

HANNAHS HANDBAGS PTY LTD

Calculate budgeted cash receipts for the quarter ended 30 June 2013.
HANNAHS HANDBAGS PTY LTD Budgeted Cash Receipts from Sales April May From cash sales in same month [1] $29 848.00 $30 765.00 [70% x current month] From credit sales same month [30% x current month x 20%) From preceding months sales [30% x 40% x preceding month] [2] 2 558 40 2 637.00

June $32 144.00

2 755.20

[3]

4 821.60

5 116.80

5 274.00

From second preceding month [4] [30% x 38% x second preceding month]

3 963.78 $41 191.78

4 580.52 $43 099.32

4 860.96 $45 034.14

[1] [2] [3] [4]

70% of monthly sales are for cash. 30% of monthly sales are for credit. 20% of monthly credit sales are collected in month of sale. 40% of monthly credit sales are collected in the next month. 38% of monthly credit sales are collected two months later. Page 3 of 4

Problem 10.4

Bank reconciliation

CAVANAGHS CHARTER TOURS Required: A. Set up cash receipts and cash payments journals with totals shown, and enter the necessary adjustments, and complete the journals for June. B. Post the journals in requirement A to the general ledger Cash at Bank account and balance the account. C. Prepare a bank reconciliation statement at 30 June. D. What is the amount of cash that should be reported on the 30 June balance sheet? A. Cash Receipts Journal Date Jun 30 Particulars Progress, total Vinko Ltd (dishon. cheque) Electronic transfer Interest revenue Cash at Bank $22 898 (327) 680 54 $23 305 Date Jun 30 Cash Payments Journal Particulars Progress, total Bank fees Adj. to Chq. 842 Error Cash at Bank $24 576 32 9

$24 617

B. Cash at Bank 1/6 30/6 30/6 C. CAVANAGHS CHARTER TOURS Bank Reconciliation Statement as at 30 June Balance as per bank statement Cr Add: Outstanding deposit Less: Unpresented cheques: no. 864 no. 866 no. 870 Balance as per Cash at Bank account Dr $60 73 112 Balance b./d CRJ Balance b/d $6 300 30/6 23 305 $29 605 $4 988 CPJ Balance c/d $24 617 4 988 $29 605

$4 033 1 200 $5 233

245 $4 988

D. Cash at bank $4 988

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