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Principle of Internal Control

Establish Responsibilities
Maintain adequate records
Insure assets and bond key employees
separate record keeping from Custody of assets
Divide responsibilities for related transactions
Apply Technological controls
Perform regular and independent reviews

Petty Cash System

for small expenditure insist
set aside small amount of cash in a box or set up a separate checking account

Journal Entries to Replenish Petty Cash Account

Assume $70 in PCA
Postage Exp 15
Supply Exp 10
Misc Exp 05
Cash 30

Cash Over and Short

30 Receipts but 65 in box - have $35 to reach
Postage Exp 15
Supply Exp 10
Misc Exp 5
Cash Over/Short 5
Cash 35

Bank Reconciliation

Reconciles Balance per books to Balance per Bank Statement

Book Balances

MINUS: Bank Service Charge, Payment made by bank, errors by company
ADD: Collection Received by Bank, NSF Checks, Bank Book Errors

Bank Statement

MINUS: Outstanding Checks, Book Errors
ADD: Deposit in transit, Bank Errors

Cash Discounts

Recorded as Gross 0 as if discount isn't going to be taken
NET: Perpetual - assume discount WILL BE TAKEN

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