Beruflich Dokumente
Kultur Dokumente
Thomas H. Beechy
Schulich School of Business,
York University
Joan E. D. Conrod
Faculty of Management,
Dalhousie University
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Joan E. D. Conrod
Faculty of Management,
Dalhousie University
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Introduction
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Characteristics Of Cash
And Cash Equivalents
The
Cash
equivalents
are items
that canonly
readily
be converted
to cash. Theyavailable
include:
cash account
includes
those
items immediately
to
pay obligations.
Cashknown
includes:
treasury
bills (widely
as T-bills),
balances investment
on deposit with
financial(GICs),
institutions,
guaranteed
certificates
commercial
paper (short-term notes receivable from other
coins and currency,
companies),
petty cash, and
money
market
fundsinstruments accepted by financial institutions
certain
negotiable
An overdraft
is a negative
bank and
account
balance and
is reported
ascheques,
a separate
for immediate
deposit
withdrawal,
like
cashier's
current
liability on the balance sheet, regardless of its inclusion in cash on the
certified
cheques, and
cash flow statement.
money orders.
A compensating
balance is a minimum balance that must be maintained in a
depositor's account as support for funds borrowed by the depositor should not be
included in the current cash account because they are not currently available for
use.
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Fred Jones
The record keeper must
Pay to the order of
not have the authority to
sign cheques, or at least
Bank of Nova Scotia
without a Co-signer.
Bank accounts provide one
means to physically safeguard cash balances, but
theyre also integral to proper cash management.
The bank account provides an opportunity to check the
accuracy of the accounting records. Its the only general
ledger account that another company runs parallel
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Internal Control
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Internal
Controls For
Cash
INTERNAL
CONTROL
FOR CASH
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Internal Controls OF
For Cash
Receipts
CONTROL
CASH
RECEIPTS
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EXHIBIT 8-1
Information for Bank Reconciliation
Bank Statement
August 1 balance
Deposits recorded in August
Cheques cleared in August
Account receivable collected
(including $100 interest)
NSF cheque, J. Fox, $300
plus $30 fee
August service charges
August 31 balance
Additional
data,
of July:
Additional
data,
endend
of August:
Deposits in transit, $5,000, and
Cash on hand (un-deposited), $990.
chequesdata,
outstanding,
$8,000 A
Additional
end
of August:
This
amount
will
be
deposited
Additional
data,
end of August:
The
(these
two
amounts
were
taken
cheque
written
by
West
in
the
amount
September
service
$200 include a $10
fromcharges
the1 Julyofbank
of $240 for a repair bill in August is
reconciliation).
charge
to a company named Weston
included in the cleared cheques. West
Company that was charged to West
recorded the cheque for $420, the
Company in error
correct amount, debiting repair
expense. The cheque was for the
wrong amount. The payee will bill
West for the remaining $180 due.
$32,000
$77,300
-71,240
1,100
-330
-200
6,630
$38,630
$29,990
75,300
-70,420
4,880
$34,870
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EXHIBIT 8-2
WEST COMPANY
Bank Reconciliation
31 August 20x2
Bank Statement
Ending bank balance, August 31
$38,630
Additions: Cash on hand (undeposited)
$990
Deposits in transit, August 31
($5,000 + $75,300 - $77,300)
3,000
Bank error re: service charge
10
Cheques outstanding August
31 ($8,000 + $70,240 Deductions: $71,240)
-7,000
-3,000
Adjusted balance
$35,630
Book Balance
Ending
book balance,
Augustat
1 end of prior period
$34,870
Outstanding
cheques
Accounts
receivable
collected
Deposits
in transit
at the
endcurrent
of priorperiod
period
Cheques
written
during
Additions: by bank
1,000
Deposits
for
the
current
period
(per
books)
(per cash Interest
payments journal, as corrected:
100
Total amount
that could
Error in recording
repair have been deposited
$70,420
$180
payment
overstatement)
payment
180
Deposits
shown
in
bank
statement
Total cheques
that could
have cleared
NSF cheque,
J. Fox, $300,
Deposits
endbank
of current
Deductions:
plus in
$30transit
NSF
fee at in
-330 period
Cheques
cleared
shown
statement
Bank service charges
-190
760
Outstanding
cheques
at end
Adjusted
balance
$35,630
Copyright
1998
McGraw-Hill
Ryerson Limited,
Canadaof current period
Cash
hand.
This
is
Bank on
errors.
The
bank
the
cash the
recorded
as a
charged
company
debit
to the
companys
$10 too
much
service
cash
account,
not to
charge.
Theyllbut
have
deposited
at receivable
month-end.
Account
beBank
informed
of the
service
charges
Cash
or
cheques
are An
collected
by bank.
Error
in
recording
error,
and
appropriate
The bank debited
being
held
- hopefully
account
receivable
for
$
8,000
West
recorded
a
$240
documentation
West's
account funds
for
Non-sufficient
$a 5,000
in
safe
by
the
$1,000
plus
$100
cheque
in
the
cash
(NSF)
cheque
A
$300
provided
so
thatcharges
the
$190
of
bank
75,300from
company
at
August
31.J.
accrued
interest
was
cheque
customer
disbursements
journal
bank
will
put
the
$10
in80,300
August for cheque
This
amount
iswas
added
to
collected
by
the
bank
Fox,
which
not
70,240
as
$420,
debiting
back
in
the
account
by
printing,
chequing
supported
by recorded
sufficient
(77,300)
the
bank
balance.
but 78,240
wasthe
not
accounts
payable
and
reversing
charge
account
privileges,
funds
in
Fox's
chequing
$ 3,000
bycash
Westfor too
(71,240)
crediting
and
collection
of to
account,
was returned
$ethe7,000
much.
Westh by
bank.
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o mcheques.
customer
7/31
Description
Page 13
PR
Debit
Credit
1100
Cash
Accounts Receivable
Interest Revenue
7/31
1000
100
300
Cash
7/31
7/31
300
Miscellaneous Expense
Cash
190
Cash
180
190
Accounts Payable
180
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Accounts Receivable
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Cash Discounts
2/10, n/30
Percentage
Discount
# of Days
Discount is
Available
Otherwise,
Net (or All)
is Due
Net Amount is
Due in this #
of Days
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Cash Discounts
Gross Method - Record sales discounts only if the customer pays within
the discount period.
Net Method - Record sales discounts only if the customer fails to pay
within the discount period.
GENERALJOURNAL
JOURNAL
GENERAL
Date
Date
Paytime
At
within
Late
ofPayment
sale
discount period
Description
Description
GROSSMETHOD
METHOD
GROSS
Cash
Cash
Accounts
Receivable
Accounts
Receivable
Sales Discount
Sales
Revenue
Accounts Receivable
NETMETHOD
METHOD
NET
Cash
Accounts
Receivable
NET METHOD
SalesRevenue
Discount Forfeited
Cash Sales
AccountsReceivable
Receivable
Accounts
PR
PR
Page 42
52
Page
52
Debit
Debit
5,000
5,000
4,950
50
5,000
4,950
4,950
home
Credit
Credit
5,000
5,000
5,000
50
4,950
4,950
4,950
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Allowance Method
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Allowance Method
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ALLOWANCE METHOD
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Past Due
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Renco, Inc.
Estimate of Bad Debts
Sales for 19X6
$ 2,000,000
Cash sales during the period
250,000
Net credit sales
1,750,000
Bad debt percentage
1.25%
Bad debts expense
$
21,875
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GENERAL JOURNAL
Date
Description
Page 11
PR
Debit
Credit
21,875
21,875
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SOLUTION
GENERAL JOURNAL
Date
Page 11
Description
PR
Debit
Credit
21,875
21,875
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Crecore, Inc.
Estimate of Bad Debt Expense
Accounts receivable at year-end
Bad debt composite rate
Balance in Allowance account
Current Allowance balance
Bad debt expense
$ 191,000
2.50%
4,775
1,250
$ 3,525
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GENERAL JOURNAL
Date
Description
Page 17
PR
Debit
3,525
Credit
3,525
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GENERAL JOURNAL
Date
Page 17
Description
PR
12/31
Balance
12/31
Adjusting entry
Credit
3,525
Date
Debit
3,525
ACCOUNT No.
PR
GJ17
Debit
Credit
172
Balance
1,250
1,250
3,525
4,775
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AGING OF RECEIVABLES
EXAMPLE
Wells, Inc. reports accounts receivable of $233,000
at December 31, 19X7. Wells uses aging of
receivables to estimate bad debts. The company
has developed historical loss percentages for
accounts currently due, those 30, 60 and over
60-days past due. The schedule on the following
page shows the aging schedule. The balance in
the allowance account at December 31 is $327.
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AGING OF RECEIVABLES
SOLUTION
Receivable
Loss
Allowance
Age Category
Amount Percentage Balance
Current
$ 200,000
0.50% $ 1,000.00
1-30 days past due
25,000
0.75%
187.50
31-60 days past due
5,000
1.00%
50.00
Over 60 days past due
3,000
10.00%
300.00
Total Accounts Receivable $ 233,000
$ 1,537.50
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AGING OF RECEIVABLES
SOLUTION
$ 1,537.50
327.00
$ 1,210.50
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AGING OF RECEIVABLES
SOLUTION
$ 1,537.50
327.00
$ 1,210.50
GENERAL JOURNAL
Date
Description
Page 7
PR
Debit
Credit
1,210.50
1,210.50
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EXHIBIT 8-3
Information for Bad Debt Estimation
Accounts Receivable
Jan. 1/20x2 balance
101,300 Collections
Credit sales
500,000 Write-offs
Dec. 31/20x2 balance 177,500
420,000
3,800
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Customer
Balance
Age of account balance
account
31 Dec. 20x2 Current
1-30 days 31-60 days Over 60 days
Denk
$500
$400
$100
Evans
900
900
Field
1,650
1,350
$300
Harris
90
30
$60
King
800
700
60
40
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Zabot
250
250
Total
$177,500
$110,000
$31,000
$29,500
$7,000
Percent
Bad
debt expense [$5,690 + $500]
6,190
estimated
Allowance for doubtful
accounts8.00%
6,190
uncollectible
0.20%
1.00%
40.00%
Amount
estimated
$5,650
uncollectible
$220
$310
$2,360
$2,800
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EXHIBIT 8-5
Sale of Receivables MacMillan Bloedel Limited
3.
Sale of receivables:
In 1996, MacMillan Bloedel entered into
agreements to sell designated pools of trade
receivables to two trusts. At December 31, 1997,
the two trusts held $226 million (1996 $219
million) of such receivables. The agreements
expire in July 1999.
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Current Liabilities
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