西方財務會計-chapter5

1、CHAPTER 5CASH AND ITS CONTROL1IntroductionCash is one of financial assets.Financial assets include cash,short-term investments and receivables.Financial assets are shown in the balance sheet at their current values. Current value is measured differently for each type of financial asset.2Current valu

2、eThe current value of cash is simply its face amount.The current value of short-term investments (marketable securities) is current market value. (represents an exception to the cost principle)The current value of accounts receivable is Net realizable value.3Introductionadequate supply of cash tomak

3、e variety paymentsavoid cash shortages during business expansions otherwise the business has risks of insolvent and bankruptcy. avoids keeping excessive amounts on hand or in banks because cash is an unproductive asset unless invested.4Why should a business control cash?To ensure that sufficient cas

4、h is available when needed and that too much cash is not idle, managers must plan and control carefully the cash needs of the business. In addition, because cash is universally desirable, a good business must maintain careful control over its cash to ensure that it is not lost through fraud or embez

5、zlement.5Definition of CashCash consists of demand deposits, currency, coins, money orders, and checks awaiting deposit. Demand deposits are bank checking accounts. Saving accounts are called time deposits. Time deposits are usually considered cash although they are in reality temporary investments.

6、6Definition of CashThings that are sometimes mistakenly viewed as cash but that are not cash include postage stamps, postdated checks, checks returned by the bank for lack of sufficient funds, and IOUs of employees and officers for small amounts borrowed from the company.7Cash EquivalentsCombined wi

7、th cash account in the B/S.Cash equivalents include some very liquid short-term investments Cash equivalents are very safe, have very stable market value,and mature within 90 days of the date of acquisition. 8Cash controllingCash receiptsCash paymentsCash balance9Controlling Cash Receipts1. All rece

8、ipts should be banked promptly.2. Receipts from cash sales should be supported by sales tickets, cash register tapes, and so on. 3. Accountability should be established each time when cash is transferred.4. Persons receiving cash should not make disbursements of cash, record cash transactions, or re

9、concile bank accounts.10Controlling Cash Disbursements1. All disbursements, except petty cash payments, should be made by prenumbered check.2. Vouchers and supporting documents should be submitted for review when checks are signed.3. Persons who sign checks should not have access to cash receipts, s

10、hould not have custody of funds or record cash entries, and should not reconcile bank accounts.11Controlling cash balanceBank reconciliationBank accountsPetty cash12Petty Cash Imprest fund For routine small disbursements. Amounts can vary from $50 or less to more than $10,000. A large organization m

11、ay have several petty cash funds in a variety of offices and production facilities.13Petty Cash(cont.) The balance of the petty cash account, which is part of the total cash balance, changes only when the fund is established, changed in amount, or discontinued.14Petty Cash Fund :stepsEstablishment (

12、entries)Making small payments (preparing payout vouchers) (no entries)At the end of the period, accountants should make entries for payments and replenishment. (including any Cash short or over)15Petty Cash Fund : Example1. Assume that a $3,000 petty cash fund is established. Petty Cash 3,000 Cash 3

13、,00016Petty Cash Fund : Example(cont.)2. The custodian reviews authorization on vouchers for cash requests and dispenses the required cash. The vouchers are kept with the fund. The sum of cash and vouchers should equal $3,000. Journal entries are not made for disbursements.17Petty Cash Fund : Exampl

14、e(cont.)3. At the end of the first month, assume that $560 remains in the fund, indicating that $2,440 was disbursed during the month ($3,000 - $560 ) and that the custodian should have $2,440 in supporting payout vouchers. (2440payout+560remains=3000)18Petty Cash Fund : Example(cont.)The entry made

15、 by the accountant is as follow: Postage Expense 900 Office Supplies Expense 700 Transportation Expense 800 Utility expense 40 Cash 2,44019Petty Cash Fund : ExampleIf some errors occur: Presumably, a voucher was lost, or a voucher understates the amount disbursed. The following individual vouchers a

16、ccompany the fund: postage,$900; office supplies, $700; and taxi fares, $800 ( $2,400 in total ). There is a $40 cash shortage ($2,440 - $2,400 ). 20Petty Cash Fund : ExampleThe shortage is reflected in a replenishment entry: Postage Expense 900 Office Supplies Expense 700 Transportation Expense 800

17、 Cash Short and Over 40 Cash 2,44021Petty Cash Fund : Example4. When a petty cash fund is increased, decreased, or closed, an entry is made affecting both the petty cash and cash accounts.For example, if the fund is increased to $5,000 because of increased office cash needs, the entry is as follows:

18、 Petty Cash 2,000 Cash 2,00022The Bank ReconciliationA bank sends its depositors monthly statements describing the activity of the depositors account. The statement includes the cash balance in the account at the beginning of the month, a list of deposits made during the month, a list of checks paid

19、 by the bank for the depositor, and the ending balance in the account. In addition, the bank also lists any service charges that it has deducted from the account and other transactions that may have taken place, such as the collection of a note by the bank on behalf of the depositor.23The Bank Recon

20、ciliationWhen the depositor receives the monthly statement, a reconciliation should be prepared to explain any differences (including evitable and inevitable differences between the cash account in the ledger and the bank statement. )24Items on books but not on bank statementOutstanding checks. Outs

21、tanding checks are those issued by the depositor but not yet presented to the bank for payment. Deposits in transit. Deposits in transit comprise cash receipts recorded by the company but too late to be deposited.25Items on books but not on bank statementBookkeeping errors. Bookkeeping errors arise

22、in recording amounts of checks; for example, a transposition of figures. The item should be added if it was previously overstated. If the item was previously understated, the amount should be deducted.26Items on bank statement but not on books Service charges. The bank generally deducts amounts for

23、bank services. The exact amount is usually not known by the depositor until the statement is received.NSF (nonsufficient funds) checks. NSF checks have been deposited but cannot be collected because of insufficient funds in the account of the drawer of the check. The bank then issues a debit memoran

24、dum charging the depositors account.Collections. The bank collects notes and other items for the depositor. The bank then adds the proceeds to the account and issues a credit memorandum to the depositor.Often there are unrecorded amounts at the end of the month.27Items on bank statement but not on b

25、ooksBank errors. Bank errors should not be entered on the books. They should be brought to the attention of the bank and corrected by the bank.28Steps in preparing a bank reconciliation1. prepare a bank reconciliation, determine that the adjusted balance of the bank statement is equal to the adjuste

26、d balance in the depositors records.2. Prepare journal entries to record any items in the bank reconciliation listed as adjustments to the balance per depositors records. 298885Books (GL amount) Bank statement (end of period)Plus: Receipts Plus:Notes collected Deposits in transit Interest earnedErro

27、rsErrorsLess: Disbursements Less:NSF checks Outstanding ChecksService charges ErrorsBank fees Errors*End Balance of cash *End Balance of Cash*The above figures should agree = “True” CashBank Reconciliation30Example 1(page.129)(cont.)The following information was available when the Gordon Company beg

28、an to reconcile its bank balance on May 31. 199x, balance per depositors books, $9,983.80; balance per bank statement, $9,561.40; depositor in transit, $1,703.50; checks outstanding No.1385 for $120.50, No. 1386 for $873.10 and No. 1387 for $401.50; bank service charge, $7.00; NSF check for $134.00;

29、 bookkeeping error $27 overstated for telephone expense.31Example 1(cont.)Gordon CompanyBank ReconciliationMay 31. 199xBalance per bank statement $9561.40 Balance per books $9983.80Add:Deposit in transit 1703.50 Less:Service charge $7.00 $11264.90 NSF check 134.00 141.00 Less:Outstanding checks $9842.80 No.1385 120.50 Add: No.1386 873.10 Bookkeeping error 27.00 No.1387 401.50 1395.10Corrected bank balance $9869.80 Corrected book balance $9869.80 = =32Example 1Journal entries should be made for any adjustments to the book accounts. To complete the reconciliation, the following two jour