Montclair State University

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Montclair State University

• Accounting 520
• Cash

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Cash
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(No Transcript)
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Topics to be Discussed

• Balance Sheet
• formats
• Cash
• components
• internal control procedures for cash
• bank reconciliation
• petty cash
• cash on hand (change fund)
• balance sheet presentation of cash

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Balance Sheet

• A summary of the assets, liabilities, and owners
  equity of an accounting entity as of a given date

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Balance SheetAlternative Titles

• Statement of Financial Position
• Statement of Financial Condition
• Position Statement

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Balance Sheet Formats

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Account Form

Assets
Liabilities Owners Equity
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Account Form

Assets
Liabilities Owners Equity
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Report Form

Assets Liabilities Owners Equity
The companys performance during the past year
indicated how well the company is pre- pared for
the global markets of the future. Company
sales increased 12 from last year, while profits
increased 9 over last year. An increase in our
customer base of 8 should enable future revenues
and profits to increase at an even higher rate.
Our past performance was good, Our current
performance was the best yet. Our future looks
very bright.
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Financial Position Form

The companys performance during the past year
indicated how well the company is pre- pared for
the global markets of the future. Company
sales increased 12 from last year, while profits
increased 9 over last year. An increase in our
customer base of 8 should enable future revenues
and profits to increase at an even higher rate.
Our past performance was good, Our current
performance was the best yet. Our future looks
very bright.
Current Assets - Current
Liabilities Working Capital Other
Assets - Other Liabilities Owners
Equity
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Financial Position Form

The companys performance during the past year
indicated how well the company is pre- pared for
the global markets of the future. Company
sales increased 12 from last year, while profits
increased 9 over last year. An increase in our
customer base of 8 should enable future revenues
and profits to increase at an even higher rate.
Our past performance was good, Our current
performance was the best yet. Our future looks
very bright.
Current Assets - Current
Liabilities Working Capital Other
Assets - Other Liabilities Owners
Equity
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Working Capital

• Difference between current assets and current
  liabilities

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Financial Position Form

The companys performance during the past year
indicated how well the company is pre- pared for
the global markets of the future. Company
sales increased 12 from last year, while profits
increased 9 over last year. An increase in our
customer base of 8 should enable future revenues
and profits to increase at an even higher rate.
Our past performance was good, Our current
performance was the best yet. Our future looks
very bright.
Current Assets - Current
Liabilities Working Capital Other
Assets - Other Liabilities Owners
Equity
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Financial Position Form

The companys performance during the past year
indicated how well the company is pre- pared for
the global markets of the future. Company
sales increased 12 from last year, while profits
increased 9 over last year. An increase in our
customer base of 8 should enable future revenues
and profits to increase at an even higher rate.
Our past performance was good, Our current
performance was the best yet. Our future looks
very bright.
Current Assets - Current
Liabilities Working Capital Other
Assets - Other Liabilities Owners
Equity
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Financial Position Form

The companys performance during the past year
indicated how well the company is pre- pared for
the global markets of the future. Company
sales increased 12 from last year, while profits
increased 9 over last year. An increase in our
customer base of 8 should enable future revenues
and profits to increase at an even higher rate.
Our past performance was good, Our current
performance was the best yet. Our future looks
very bright.
Current Assets - Current
Liabilities Working Capital Other
Assets - Other Liabilities Owners
Equity
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Financial Position Form

The companys performance during the past year
indicated how well the company is pre- pared for
the global markets of the future. Company
sales increased 12 from last year, while profits
increased 9 over last year. An increase in our
customer base of 8 should enable future revenues
and profits to increase at an even higher rate.
Our past performance was good, Our current
performance was the best yet. Our future looks
very bright.
Current Assets - Current
Liabilities Working Capital Other
Assets - Other Liabilities Owners
Equity
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Financial Position Form

The companys performance during the past year
indicated how well the company is pre- pared for
the global markets of the future. Company
sales increased 12 from last year, while profits
increased 9 over last year. An increase in our
customer base of 8 should enable future revenues
and profits to increase at an even higher rate.
Our past performance was good, Our current
performance was the best yet. Our future looks
very bright.
Current Assets - Current
Liabilities Working Capital Other
Assets - Other Liabilities Owners
Equity
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Financial Position Form

The companys performance during the past year
indicated how well the company is pre- pared for
the global markets of the future. Company
sales increased 12 from last year, while profits
increased 9 over last year. An increase in our
customer base of 8 should enable future revenues
and profits to increase at an even higher rate.
Our past performance was good, Our current
performance was the best yet. Our future looks
very bright.
Current Assets - Current
Liabilities Working Capital Other
Assets - Other Liabilities Owners
Equity
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Balance Sheet Formats

Report Form
Assets




Liabilities

Owners' Equity
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Balance Sheet Formats

• 2001 2000 1999 1998
• Report form ......................... 494 502 477
  465
• Account form ....................... 105 97 122 13
  4
• Financial position form ........ 1 1 1 1
• Total Companies ............. 600 600 600 600

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Cash
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Assets
Hirsch Parachute Co. Balance Sheet As of December
31, 20x2 Assets Current Assets
Cash 5,000 Accounts
Receivable 40,000 Merchandise
Inventory 75,000
Supplies 1,000 Prepaid
Insurance 100 Prepaid
Advertising 100 Total Current
Assets 121,200 Plant and
Equipment Land
5,000 Building 56,000 Less
Accumulated Depreciation 2,200
53,800 Equipment 20,000 Less
Accumulated Depreciation 2,000
18,000 Total Plant and Equipment
76,800
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Assets

• Probable future economic benefits obtained or
  controlled by a particular entity as a result of
  past transactions or events

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Current Assets
Cash and other assets reasonably expected to be
realized in cash or sold or consumed during one
year or the normal operating cycle, whichever is
longer
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CashA Current Asset

• a medium of exchange
• immediately available
• no use restrictions

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CashA Current Asset

• Includes

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CashA Current Asset

• Includes
• Cash in Bank
• Checking Accounts
• Savings Accounts

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CashA Current Asset

• Includes

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CashA Current Asset

• Includes
• Cash on Hand
• Coins and Currency
• Petty Cash Fund
• Change Fund
• Unrestricted Foreign Currency

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CashA Current Asset

• Includes
• Cash on Hand
• Coins and Currency
• Petty Cash Fund
• Change Fund
• Unrestricted Foreign Currency
• Negotiable Instruments
• Money Orders
• Cashiers Checks
• Personal Checks
• Bank Drafts

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CashA Current Asset

• Excludes

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CashA Current Asset

• Excludes
• Postdated Checks

Nov. 8, 2003
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CashA Current Asset

• Excludes
• Postdated Checks
• IOUs

I promise to pay one hundred dollars on May 1,
2004 to DerekJeter with interest at 8. A-Rod
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CashA Current Asset

• Excludes
• Postdated Checks
• IOUs
• Postage Stamps

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CashA Current Asset

• Excludes
• Postdated Checks
• IOUs
• Postage Stamps
• Restricted Funds

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Cash Equivalents

• Contain restrictions or penalties on their
  conversion to cash
• Are nearly as liquid as cash
• Examples

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Cash Equivalents

• Contain restrictions or penalties on their
  conversion to cash
• Are nearly as liquid as cash
• Examples
• Money market savings certificates
• Certificates of deposit

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Cash - Balance Sheet Caption
2001 2000 1999 1998 Cash 35 53 57 57 Cash and
cash equivalent 496 473 469 462 Cash and
equivalents 32 37 35 40 Cash includes
certificates of deposit or time
deposits 4 7 8 5 Cash combined with marketable
securities 27 27 29 31 No amount for
cash 6 3 2 5 Total Companies 600 600 600 600

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Methods of CommittingCash Fraud

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Methods of Committing Cash Frauds

• Petty Cash
• Overstating totals of vouchers in petty cash
  reimbursements
• Two entries for same voucher -- one in petty cash
  and one in regular cash
• False vouchers for postage, supplies and other
  expenditures
• Checks included in cash on hand with no intention
  of depositing
• Cash receipts
• Lapping -- delaying proper credit for receipts
• Unrecorded waste and scrap sales
• Underfooting cash receipts record
• Increasing discount column in cash receipts
  record with a corresponding decrease in cash
  received column
• Withholding cash sales or portions thereof
• Withholding receipts from sale of merchandise
  repossessed
• Withholding cash income from securities
• Withholding refunds of overpayment of vendors
  accounts
• Substituting charge sale slips (fictitious name)
  for cash sales

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Internal Control Proceduresto Protect Cash

• Separation of duties
• All receipts deposited, intact, in a bank daily
• All major payments made by check

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Bank Statement
First National Bank

Collegeville, New Jersey 07042
Statement For
Collegeville Sporting Goods Company
Page
1
450 Ridgewood Avenue
September 30, 20x2
Collegeville, NJ 07043
Account No.
26417-83
Date Transaction Description
Amount Balance
0901x2
Beginning Balance

1,538.76
0902x2
Check 68
- 25.87
1,512.89
0902x2
Check 67
- 34.25
1,478.64
0902x2
Check 65
-128.00
1,350.64
0902x2
Deposit
66.32
1,416.96
0905x2
Check 69
- 55.00
1,361.96
0905x2
Deposit
256.77
1,618.73
0907x2
Check 70
- 68.35
1,550.38
0907x2
Check 71
-485.00
1,065.38
0907x2
Deposit
225.45
1,290.83
0908x2
Check 66
- 75.00
1,215.83
0909x2
Check 73
- 12.00
1,203.83
0909x2
Check 72
- 75.05
1,128.78
0909x2
Deposit
420.10
1,548.88
0912x2
Check 74
- 26.00
1,522.88
0912x2
Deposit
128.15
1,651.03
0914x2
Check 75
-675.00
976.03
0914x2
Deposit
176.48
1,152.51
0916x2
Deposit
188.00
1,340.51
0920x2
Check 76
- 86.00
1,254.51
0920x2
Deposit
275.40
1,529.91
0920x2
Check 79
- 25.24
1,504.67
0920x2
Check 77
-122.65
1,382.02
0921x2
Check 78
- 41.62
1,340.40
0921x2
Check 80
- 67.30
1,273.10
0921x2
Deposit
65.00
1,338.10
0923x2
Check 82
-165.54
1,172.56
0923x2
Deposit
355.06
1,527.62
0926x2
Check 84
- 10.60
1,517.02
0926x2
Deposit
586.73
2,103.75
0928x2
Check 88
-300.00
1,803.75
0928x2
Check 85
-250.00
1,553.75
0928x2
Check 87
-200.00
1,353.75
0928x2
Deposit
63.42
1,417.17
0930x2
Check 91
- 50.00
1,367.17
0930x2
Check 89
- 11.25
1,355.92
0930x2
SC
- 2.20
1,353.72
0930x2
Deposit
128.00
1,481.72


NSF Not Sufficent Funds
Code
COL Collection
PS Payment Stopped
SC Service Charge
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?

• Bank Balance Book Balance

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Reasons Bank Balance ? Book Balance

• items company knew about but bank did not know
  about
• items bank knew about but company did not know
  about
• bank errors
• book errors

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Bank Reconciliation

• Balance Per Bank
• /- Adjust for items company knew about but bank
  did not know about
• /- Bank errors
• Adjusted Bank Balance

• Balance Per Book
• /- Adjust for items bank knew about but company
  did not know about
• /- Book errors
• Adjusted Book Balance

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Bank Reconciliation Examples

• Bank reconciliation prepared as of December 31

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Bank Reconciliation ExamplesNumber 1
Company checks written and recorded by the
company in December, but still outstanding at
December 31
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Bank Reconciliation ExamplesNumber 1

• - Bank Company checks written and recorded by the
  company in December, but still outstanding at
  December 31

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Bank Reconciliation ExamplesNumber 2

• Proceeds from a customers note, collected by
  the bank, but for which no entry has yet to be
  recorded by the company

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Bank Reconciliation ExamplesNumber 2

• Book Proceeds from a customers note, collected
  by the bank, but for which no entry has yet to be
  recorded by the company

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Bank Reconciliation ExamplesNumber 3

• Bank service charges for December, not
  previously recorded by the company

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Bank Reconciliation ExamplesNumber 3

• - Book Bank service charges for December, not
  previously recorded by the company

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Bank Reconciliation ExamplesNumber 4

• Deposit of November 30 not recorded by the bank
  until December 2

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Bank Reconciliation ExamplesNumber 4

• no effect Deposit of November 30 not recorded by
  the bank until December 2

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Bank Reconciliation ExamplesNumber 5

• Company checks written and recorded by the
  company in November, but still outstanding at
  December 31

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Bank Reconciliation ExamplesNumber 5

• - Bank Company checks written and recorded by the
  company in November, but still outstanding at
  December 31

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Bank Reconciliation ExamplesNumber 6

• A stolen check lacking an authorized signature
  had been deducted from the companys account by
  the bank in error

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Bank Reconciliation ExamplesNumber 6

• Bank A stolen check lacking an authorized
  signature had been deducted from the companys
  account by the bank in error

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Bank Reconciliation ExamplesNumber 7

• Customers check returned by bank marked NSF.
  No entry has previously been made on the
  companys books to record the return of this check

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Bank Reconciliation ExamplesNumber 7

• - Book Customers check returned by bank marked
  NSF. No entry has previously been made on the
  companys books to record the return of this check

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Bank Reconciliation ExamplesNumber 8

• Company checks written and recorded by the
  company in November, but received and recorded by
  the bank in December

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Bank Reconciliation ExamplesNumber 8

• no effect Company checks written and recorded by
  the company in November, but received and
  recorded by the bank in December

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Bank Reconciliation ExamplesNumber 9

• Company check number 234 had been entered in the
  accounts as 1,335 it was deducted on the bank
  statement in the correct amount of 1,355

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Bank Reconciliation ExamplesNumber 9

• - Book Company check number 234 had been entered
  in the accounts as 1,335 it was deducted on
  the bank statement in the correct amount of 1,355

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Bank Reconciliation ExamplesNumber 10

• Deposit of December 31 not to be recorded by the
  bank until January

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Bank Reconciliation ExamplesNumber 10

• Bank Deposit of December 31 not to be recorded
  by the bank until January

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Alternative Format

• Balance per bank
• Adj. bank balance
• Balance per company
• Adj. book balance

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Alternative Format

• Balance per bank Balance per bank
• Adj. bank balance
• Balance per company
• Adj. book balance Balance per company

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Alternative Format

• Balance per bank
• Balance per company

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Alternative Format

• Balance per bank Balance per bank
• Adj. bank balance
• Balance per company

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Alternative Format

• Balance per bank Balance per bank
• Adj. bank balance
• Adj. book balance
• Balance per company Balance per company

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Alternative Format

• Balance per bank Balance per bank
• Adj. bank balance Adj. bank balance
• Balance per company Adj. book balance
• Adj. book balance Balance per company

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Petty Cash
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Petty Cash

• Establish
• Petty Cash 100
• Cash in Bank 100

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Petty Cash

• Establish
• Petty Cash 100
• Cash in Bank 100
• Disburse
• obtain receipt, no entry

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Petty Cash

• Establish
• Petty Cash 100
• Cash in Bank 100
• Disburse
• obtain receipt, no entry
• Replenish
• Miscellaneous Expenses 35
• Office Supplies 50
• Cash in Bank 85

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Replenish Petty Cash

• Replenish
• Miscellaneous Expenses 35
• Office Supplies 50
• Cash in Bank 85

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Replenish Petty Cash

• Replenish - One Entry
• Miscellaneous Expenses 35
• Office Supplies 50
• Cash in Bank 85

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Replenish Petty Cash

• Replenish - One Entry
• Miscellaneous Expenses 35
• Office Supplies 50
• Cash in Bank 85
• Replenish - Two Entries
• Miscellaneous Expenses 35
• Office Supplies 50
• Petty Cash 85

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Replenish Petty Cash

• Replenish - One Entry
• Miscellaneous Expenses 35
• Office Supplies 50
• Cash in Bank 85
• Replenish - Two Entries
• Miscellaneous Expenses 35
• Office Supplies 50
• Petty Cash 85
• Petty Cash 85
• Cash in Bank 85

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Replenish Petty Cash

• Replenish - One Entry
• Miscellaneous Expenses 35
• Office Supplies 50
• Cash in Bank 85
• Replenish - Two Entries
• Miscellaneous Expenses 35
• Office Supplies 50
• Petty Cash 85
• Petty Cash 85
• Cash in Bank 85

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Accounting for Change Fund
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Accounting for Change Fund

• Establish
• Cash on Hand 400
• Cash in Bank 400

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Accounting for Change Fund

• Establish
• Cash on Hand 400
• Cash in Bank 400
• End-of-Day Accounting
• Cash in Bank
• Sales

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Accounting for Change Fund

• Establish
• Cash on Hand 400
• Cash in Bank 400
• End-of-Day Accounting
• Cash in Bank 495
• Sales

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Accounting for Change Fund

• Establish
• Cash on Hand 400
• Cash in Bank 400
• End-of-Day Accounting
• Cash in Bank 495
• Sales 500

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Accounting for Change Fund

• Establish
• Cash on Hand 400
• Cash in Bank 400
• End-of-Day Accounting
• Cash in Bank 495
• Cash Short and Over 5
• Sales 500

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Balance Sheet Presentationof Cash

• Cash in bank, cash on hand, and petty cash shown
  as single amount
• Frequently combined with cash equivalents

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Cash - Balance Sheet Caption
2001 2000 1999 1998 Cash 35 53 57 57 Cash and
cash equivalent 496 473 469 462 Cash and
equivalents 32 37 35 40 Cash includes
certificates of deposit or time
deposits 4 7 8 5 Cash combined with marketable
securities 27 27 29 31 No amount for
cash 6 3 2 5 Total Companies 600 600 600 600

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Cash