Chp 8 : Cash Flashcards
Give 2 reasons why cheques are rejected by banks
(1) Cheque has expired – eg it was dated one year ago and is no longer valid.
(2) Cheque is post dated – eg it was written for a future date and the bank will pay on or after that date
(3) Cheque is post dated – eg it was written for a future date and the bank will pay on or after that date
(4) Cheque is post dated – eg it was written for a future date and the bank will pay on or after that date
(5) Cheque is post dated – eg it was written for a future date and the bank will pay on or after that date
Explain how internal controls protect cash
(study 2 in detail)
1) Segregation of duties
2) Custody of cash.
3) Get proper approvals for all payments from authorised personnel.
4) Do Bank reconciliation monthly
Explain 2 reasons why bank reconciliation done
(1) To compare the business’s records with the bank’s records to identity items that caused the differences between the ending balances in the business cash at bank account and the bank statement;
(2) To identify and correct any errors in the cash at bank account or bank statement;
(3) To update the cash at bank account to obtain its most accurate balance;
(4) To deter against fraud that may arise in the handling of money in the cash at bank account.
Can you recall the format for Bank reconciliation statement?
Bank reconciliation statement as at XXXX
Balance as per bank statement A
Add: Deposits in transit
Braxton B
Chang C__B+ C
Less: Cheques not yet presented
Dave D
Adj balance as per cash at bank A+ B+ C - D
Describe transaction for Jan 10
Owner withdrew $60 from business bank account for personal use
Describe transaction for Jan 11
Business withdrew $70 from business bank account for OFFICE Use
Describe transaction for Jan 12
Cheque of $200 previously received from credit customer, Alice was dishonoured,
and the $xx cash discount (if have) was withdrawn.
