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7-60 CHAPTER 7 Internal Control and Cash Sante Smoothie Saga Note: This is a continuation of the Smoothie Saga from Chapters 1 5. Prepare the monthly bank reconciliation. through 6.) 6. Transfer Natalie's manual accounting records to his computer BYP7.6 Natalie is struggling to keep up with the recording of her ac- accounting program. John maintains the accounting informa- counting transactions. She is spending a lot of time marketing and tion that he keeps for his clients on his laptop computer. selling smoothies and juicers. Her friend John is an accounting stu- 7. Prepare monthly financial statements for Natalie to review. dent who runs his own accounting service. He has asked Natalie if she would like to have him do her accounting. 8. Write himself a cheque every month for the work he has done John and Natalie meet and discuss her business. John suggests for Natalie. that he could perform the following procedures for Natalie: 1. Take the deposits to the bank every Friday. All cheques and Instructions cash received would be kept in a locked box at Natalie's house. a. Identify the weaknesses in internal control that you see in the system John is recommending. Can you suggest any improve- 2. Write and sign all of the cheques. He would review the invoices ments if Natalie hires John to do the accounting? and send out cheques as soon as the invoices are received. b. Natalie would like you to help her. She asks you to prepare a 3. Record all of the deposits in the accounting records. bank reconciliation for October 31, 2021, and any necessary 4. Record all of the cheques in the accounting records. journal entries using the following information. GENERAL LEDGER-Sante Smoothies Cash Date Explanation Rei Debit Credit Balance 2021 Oct. 1 Balance 2,657 750 3,407 0 w w Cheque #600 625 2,782 Cheque #601 95 2,687 Cheque #602 56 2,631 9 1,050 5,681 13 Cheque #603 425 3,256 20 155 3,411 evitero 28 Cheque #604 297 3,114 28 110 3,224 PREMIER BANK Statement of Account-Sante Smoothies Oct. 31, 2021 Date Explanation Cheques Deposits Balance Sept. 30 Balance 3,256 Oct. 1 Deposit 750 4,006 6 Cheque #600 625 3,381 Cheque #601 95 3,286 Cheque #602 56 3,230 Deposit 1,050 4,280 10 NSF cheque 100 10 NSF cheque fee 35 4,145 14 Cheque #603 452 3,693 20 Deposit 125 3,818 23 EFT-TELUS 85 3,733 28 Cheque #599 361 3,372 30 Bank charges 13 3,359Answers to Self-Study Questions 7-61 Additional information: 4. Natalie decided to set up an automatic payment to Telus for 1. On September 30, there were two outstanding cheques: #595 her cell phone invoice every month. Remember that she uses for $238 and #599 for $361. this phone only for business. 2. Premier Bank made a posting error to the bank statement: 5. The NSF cheque was from Ron Black. Natalie received this cheque #603 was issued for $425, not $452. cheque for selling smoothies to Ron and his children. Natalie 3. The deposit made on October 20 was for $125 that Natalie contacted Ron, and he assured her that she will receive a received for selling smoothies. Natalie made an error in record- cheque in the mail for the outstanding amount of the invoice ing this transaction. and the NSF bank charge