Bank Accounts and Cash Funds

CHAPTER 7 Bank Accounts and Cash Funds

Bank Accounts 7 and Cash Funds

CHAPTER REVIEW 1. Describe the procedure for depositing checks. The procedure for depositing checks consists of first endorsing each check and then completing a deposit slip. On the deposit slip, record the date, the amount of cur- rency to be deposited, the amount and ABA number of each check, and the total amount to be deposited. The checks to be deposited should accompany the deposit slip. 2. Reconcile a bank statement. The standard form for a bank reconciliation is as follows: Bank Statement Balance

Add Deposits in transit Bank errors that understate bank statement balance Deduct Outstanding checks Bank errors that overstate bank statement balance Adjusted Bank Statement Balance

Ledger Balance of Cash Add Notes collected Interest income earned Checkbook errors that understate the ledger balance of cash Bank credit memos Deduct Bank service charges Checkbook errors that overstate the ledger balance of cash NSF checks Bank debit memos Adjusted Ledger Balance of Cash 3. Record the required journal entries directly from the bank reconciliation. Journal entries for the Ledger Balance of Cash section are required. The entry for notes and interest collected is a debit to Cash and credits to notes Receiv- able and Interest Income. The entry for a bank service chare is a debit to Mis-

cellaneous Expense and a credit to Cash. The entry for an NSF check is a debit to Accounts Receivable and a credit to Cash. 4. Record journal entries to establish and reimburse a Petty Cash Fund. The entry to establish a Petty Cash Fund is a debit to Petty Cash Fund and a credit to Cash. The entry to reimburse the Petty Cash Fund consists of debits to the items for which payments from the Petty Cash Fund were made an one credit to Cash for the total payments. 5. Complete petty cash vouchers and petty cash payments records. A petty cash voucher is made out for each payment from the Petty Cash Fund. In the petty cash payments record, each voucher is listed and a notation is made concerning the accounts involved; also, an explanation of why the money was paid out is re- corded. The petty cash payments record is used as a source of information for mak- ing the journal entry to reimburse the Petty Cash Fund. 6. Record the journal entries to establish a Change Fund. The entry to establish the Change Fund is a debit to Change Fund and a credit to Cash. 7. Record journal entries for transactions involving Cash Short and Over. The Cash Short and Over account provides a way to keep a record of errors in mak- ing change. A debit balance in Cash Short and Over denotes a shortage, which is listed as Miscellaneous Expense; the entry is a debit to Miscellaneous Expense and a credit to Cash Short and Over. A credit balance in Cash Short and Over denotes an overage, which becomes Miscellaneous Income; the entry is a debit to Cash Short and Over and a credit to Miscellaneous Income.