Financial Accounting Take Home Assignment

September 19, 2022

Topics : Cash and Internal Control; Cash Controls, Petty Cash Fund; Bank Accounts; Reporting Cash

Bateer Company established a $50 petty cash fund on July 1. On July 30, the fund had $12 cash remaining and petty cash receipts for postage $14, supplies $10, and delivery expense $15.

Instruction: Prepare the journal entries to establish the fund on July 1 and replenish the fund on July 30.

Which of the following factors could limit a companys system of internal control?

Collusion by two or more employees

The cost of internal control being greater than the benefit

Difficulty in segregating duties in small businesses

All of the above

The principles of internal control do not include:

establishment of responsibility.

documentation procedures.

management responsibility.

independent internal verification.

Permitting only designated personnel to handle cash receipts is an application of the concept of:

segregation of duties.

establishment of responsibility.

independent checks of performance.

human resource controls.

The use of pre-numbered cheques in disbursing cash is an application of the principle of:

establishment of responsibility.

segregation of duties.

physical controls.

documentation procedures.

Authorizing only designated personnel to sign cheques is an application of the principle of:

establishment of responsibility.

segregation of duties.

independent checks of performance.

documentation procedures.

A cheque is written to replenish a $150 petty cash fund when the fund has receipts of $148 and $7 in cash. In recording the cheque:

Cash Over and Short should be debited for $5.

Cash Over and Short should be credited for $5.

Petty Cash should be debited for $148.

Cash should be credited for $148.

Bank accounts improve control over cash by:

safeguarding cash by using a bank as a depository.

minimizing the amount of cash that must be kept on hand.

giving a double record of all bank transactions.

all of the above.

Suzanne Terriault has a balance of $410 in her chequebook (her Cash account) at the end of the month. The balance on her bank statement is $500. Reconciling items include deposits in transit of $250, outstanding cheques of $350, and service charges of $10. What is Suzannes adjusted cash balance?

$390

$400

$410

$500

A company mistakenly recorded a $348 cheque written in payment of an account as $384. The journal entry required to correct this would be:

debit Accounts Payable $36; credit Cash $36.

debit Cash $36; credit Accounts Payable $36.

debit Accounts Payable $348; credit Cash $348.

debit Cash $384; credit Accounts Payable $384.

Which of the following correctly describes the reporting of cash?

Petty cash must be reported separately from cash on the balance sheet.

Restricted cash funds are always reported as a current asset.

Cash equivalents may be combined with cash on the balance sheet.

Postdated cheques from customers are included in the Cash account balance.

Identify control activities applicable to cash payments.

Bujold Company has the following internal controls over cash payments. Identify the control activity that is applicable to each of the following.

Company cheques are pre-numbered.

Blank cheques are stored in a safe in the controllers office.

All employees in the accounting department are required to take vacations each year.

The bank statement is reconciled monthly by the assistant controller.

Both the controller and the treasurer are required to sign cheques or authorize EFT.

Cheque signers are not allowed to record cash payments.

How would each of the following items be recorded on a bank reconciliation? Next to each item, record the correct letter from this list: (a) increase to bank balance, (b) decrease to bank balance, (c) increase to company cash balance, (d) decrease to company cash balance, or (e) not included in the bank reconciliation.

_______ EFT payment made by a customer

_______ Bank debit memorandum for service charges

_______ Outstanding cheques from the current month

_______ Bank error in recording a $1,779 deposit as $1,977

_______ Outstanding cheques from the previous month that are still outstanding

_______ Outstanding cheques from the previous month that are no longer outstanding

_______ Bank error in recording a company cheque made out for $160 as $610

_______ Bank credit memorandum for interest revenue

_______ Company error in recording a deposit of $160 as $1,600

_______ Bank debit memorandum for a customers NSF cheque

_______ Deposit in transit from the current month

_______ Company error in recording a cheque made out for $630 as $360

On July 31, 2024, Daisy Company had a cash balance per books of $7,250. The statement from Canada Bank on that date showed a balance of $7,690.80. A comparison of the bank statement with the Cash account revealed the following facts:

The bank service charge for July was $25.

The bank collected $1,520 of rental revenue for Daisy Company through electronic funds transfer.

The July 31 receipts of $1,193.30 were not included in the bank deposits for July. These receipts were deposited by the company in a night deposit vault on July 31.

The June 30 deposit of $2,350 was not included in the June bank statement. This amount was included in the July statement.

Company cheque No. 2480 issued to M. Wallace, a creditor, for $384 that cleared the bank in July was incorrectly entered as a cash payment on July 10 for $348.

Cash sales of $870 on July 28 were deposited in the bank. The journal entry to record the cash receipt and the deposit slip were incorrectly made out and recorded by the bookkeeper as $780. The bank detected the error on the deposit slip and credited Daisy Company for the correct amount.

Cheques #2483 for $830.10, #2485 for $575.00, and #2488 for $455 were outstanding on July 31.

On July 31, the bank statement showed an NSF charge of $800 for a cheque received by the company from H. Rai, on account. Included in this amount was a $50 service charge. The company policy is to bill the service charge back to the customer.

Payment of the monthly insurance was made using a monthly scheduled EFT payment for $975 that the bookkeeper forgot to record.

Instructions

Prepare the bank reconciliation as at July 31.

Prepare the necessary entries related to the bank reconciliation at July 31.