ACC2301 quiz 4

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Terms in this set (...)

Internal control is
the process designed to ensure reliable financial reporting, effective and efficient operations, and compliance with applicable laws and regulations. Safeguarding assets against theft and unauthorized use, acquisition, or disposal is also part of internal control.
bank reconciliation
The schedule that identifies and explains differences between the cash balance reported by the bank and the cash balance in the firm's accounting records
accounting
An information system that reports on the economic activities and financial condition of a business or other organization
A deposit in transit is
a cash deposit that is recorded in the depositor's accounting records (i.e. the company) but has not been added to the depositor's account by the bank and therefore must be added to the unadjusted bank balance.
An outstanding check is
a disbursement that has been properly recorded as a cash deduction on the depositor's (i.e. the company) books; however, the bank has not deducted the amount from the depositor's bank account because the check has not yet been presented by the payee (the customer) to the bank for payment; that is, the check has not cleared the bank.
An accounts receivable collection, as it relates to bank reconciliations, is
when companies have their customers send payments directly to the bank. The bank adds the collection directly to the depositor's account and notifies the depositor about the collection through a credit memo that is included on the bank statement.
An non-sufficient-funds (NSF) check is
a check that a company obtains from its customers and deposits in its checking account; however, when the check is submitted to the customer's banks for payment, the banks refuse payment because there is insufficient money in the customers' accounts.
Which of the following are ADDED to the unadjusted BOOK balance?
. Interest earned
Accounts receivable collections

to find the true cash balance.
Which of the following are ADDED to the unadjusted BANK STATEMENT balance
Deposits in transit

Deposits in transit will not appear on the bank statement at the end of the period because the money has not been recorded by the bank on the statement at the time the statement was created by the bank. Therefore, the company must add these amounts to its unadjusted bank statement cash balance to find the true cash balance.
Which of the following are SUBTRACTED from the unadjusted BOOK balance?
Bank service charges
Non-sufficient-funds (NSF) checks

The company has no way of knowing the amount of the service charge or if a check has bounced (NSF Check) until the bank notifies the company. Therefore, Bank service charges & Non-sufficient-funds (NSF) checks are subtracted from the company's unadjusted cash balance.
Which of the following are SUBTRACTED from the unadjusted BANK STATEMENT balance?
Outstanding checks

The bank has no way of knowing how much a check has been written out for until a check is actually presented to the bank and clears the check writer's bank account. Therefore, the company must subtract from the bank statement balance the amounts for all the checks that it has written that has not clear its bank account (i.e. outstanding checks) in order to determine its true cash balance.
Which of the following require adjustments to the company's financial statements for the cash account?
Accounts receivable collections
Non-sufficient-funds (NSF) checks
Interest earned
Recording errors
Bank service charges
1. The unadjusted balance per the bank statement on June 30 was $55,400.
2. Deposits in transit on June 30 were $2,600.
3. A debit memo was included with the bank statement for a service charge of $10.
4. A $5,220 check written in June had not been paid by the bank.
5. The bank statement included a $1,100 credit memo for the collection of a note. The principal of
the note was $1,030, and the interest collected amounted to $70.

Determine the true cash balance as of June 30. (Hint: It is not necessary to use all of the preceding items to determine the true balance
52,780

Unadjusted bank balance, 6(June)/30 $ 55,400
Plus: Deposits in transit 2,600
Less: Outstanding check (5,220 )
True cash balance, 6/30 $ 52,780
Henderson Company had an unadjusted cash balance of $9,350 as of May 31. The company's bank statement, also dated May 31, included a $150 NSF check written by one of Henderson's customers. There were $930 in outstanding checks and $240 in deposits in transit as of May 31. According to the bank statement, service charges were $65, and the bank collected a $800 note receivable for Henderson. The bank statement also showed $10 of interest revenue earned by Henderson.

Determine the true cash balance as of May 31
$ 9,945

Unadjusted book balance, 5/31 9,350
Add: Interest earned 10
Note collected by bank 800 810

Less: NSF check 150
Service charges 65 (215)

True cash balance, 5/31 9,945
John Deer owns a card shop, TexCards. The following cash information is available for the month of August 2015. As of August 31, the bank statement shows a balance of $14,140. The August 31 unadjusted balance in the Cash account of Four Aces is $9,929. A review of the bank statement revealed the following information:

1. A deposit of $1,630 on August 31, 2015, does not appear on the August bank statement.
2. According to bank statement, bank collected a $900 accounts receivable for TexCards.
3. When checks written during the month were compared with those paid by the bank, three
checks amounting to $4,975 were found to be outstanding.
4. A debit memo for $34 was included in the bank statement for the purchase of a new supply of checks.

Determine the true cash balance as of August 31
$10,795

Unadjusted bank balance, August 31, 2015 $14,140
Add: Deposit in transit $1,630
Less: Outstanding checks -4,975
True cash balance, August 31, 2015 $10,795

Unadjusted book balance, August 31, 2015 $9,929
Add: Accounts receivable collected by the bank $900
Less: Debit memo for new checks -$34
True cash balance, August 31, 2015 $10,795
Pressure is
Something that motivates to commit fraud
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