1. Chapter 11 Cash Control and Banking

2. Cash • Lifeblood of any business • Involved in many transactions • Easy target for theft and fraud

3. Cash Control Procedures • Separation of duties • Immediate listing of cash receipts • Prenumbered sales slips • Daily cash proof • Daily deposit of cash • Payment by cheque • Petty cash procedures • Periodic audit • Monthly bank reconciliations

4. Cash Short or Over • Cash may not “balance” at the end of the day • If “short” Dr Cash 490 Dr Cash Short or Over 10 Cr Sales 500 • If “long” or extra cash Dr Cash 510 Cr Sales 500 Cr Cash Short or Over 10 * Where Cash Short or Over is an expense account

5. Petty Cash • Many small transactions make cheques unworkable • Establish and maintain an in office “cash box” to cover small expenditures • Establish the fund: Dr Petty Cash 200 Cr Cash 200

6. Petty Cash • Collect receipts or give out vouchers to be completed as proof • Replenish the fund: Dr Miscellaneous Expense 35 Dr Gas Expense 90 Dr Postage 45 Dr Office Expenses 20 Cr Cash 190 Replenish the petty cash fund

7. Bank Reconciliation • Prepared monthly to determine the true amount of cash available • Compare bank statement with company cash account in ledger • Deduct from Bank balance all outstanding cheques • Add to Bank balance any late night deposit on statement date • Adjust our cash account for service charges and interest received or charged

8. Bank Reconciliation

9. Bank Reconciliation • Necessary journal entries: Dr Cash 5 Cr Interest Revenue 5 Dr Bank Charges 60 Cr Cash 60