Question

A good system of internal control for cash provides adequate procedures for protecting both cash receipts and cash disbursements. Identify each of the following statements as either true or false regarding this protection.

_____c. A basic guideline for safeguarding cash is to separate the duties of those who have custody of cash from those who keep cash records.

Solution

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Answered 1 year ago
Answered 1 year ago

Correct answer: True

This procedure helps the company in preventing deliberate manipulation of accounting records as well as misappropriation of assets.

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Related questions

accounting

Blues Music Center had the following petty cash transactions in March of the current year. Blues uses the perpetual system to account for merchandise inventory.

Mar. 5 - Wrote a $250 check to establish a petty cash fund.

6 - Paid$12.50 shipping charges (transportation-in) on merchandise purchased for resale, terms FOB shipping point. These costs are added to merchandise inventory.

11 - Paid $10.75 in delivery expense on merchandise sold to a customer, terms FOB destination.

12 - Purchased office file folders for$14.13 that are immediately used.

14 - Reimbursed Bob Geldof, the manager, $11.65 for office supplies purchased and used.

18 - Purchased office printer paper for$20.54 that is immediately used.

27 - Paid $45.10 shipping charges (transportation-in) on merchandise purchased for resale, terms FOB shipping point. These costs are added to merchandise inventory.

28 - Paid postage expense of$18.

30 - Reimbursed Geldof $56.80 for mileage expense.

31 - Cash of$61.53 remained in the fund. Sorted the petty cash receipts by accounts affected and exchanged them for a check to reimburse the fund for expenditures.

31 - The petty cash fund amount is increased by $50 to a total of$300.

Required

  1. Prepare the journal entry to establish the petty cash fund.

  2. Prepare a petty cash payments report for March with these categories: delivery expense, mileage expense, postage expense, merchandise inventory (for transportation-in), and office supplies expense.

  3. Prepare the journal entries for part 2 to both (a) reimburse and (b) increase the fund amount.