Accounting Chapter 9 Flashcards
(29 cards)
What are cash receipts?
Funds taken in from business operations and activities.
What is a float/change fund?
What the business starts the day with, usually small bills and coins used for change for customers.
What is a cash proof?
An accounting procedure that compares cash receipts according to source documents against cash receipts according to a physical count.
What are the fundamental procedures for a cash proof?
1) Record the total of the cash received as revealed by cash register tapes, sale slips, or source documents
2) Compare the total with an actual count of cash, remembering to account for the float
Why do cash shortages happen?
Cashiers accidentally gave extra change to a customer, employee dishonesty, etc.
What is a current bank account?
A bank account made specifically for business owners
What are some characteristics of a current bank account
-no earned interest
-minimum charge for monthly statement
-monthly bank statements are provided
-paid cheques are returned to the depositor each month
-books of duplicate deposit slips are provided
What is a petty cash fund?
Small quantity of cash (usually less than $200) that’s kept in the office for small expenditures
What is the imprest method?
When the petty cash fund is handled by one individual.
What is a petty cash voucher?
A form that is filled out when money is paid out of the petty fund and no bill is available for the expenditure, this is also kept in the box
What are the steps to replenish the petty cash fund?
- Fund keeper prepares a summary by account of the charges of bills and vouchers in the box (not including HST)
- Submits the summary with bills and vouchers to the person who issues cheques
- Cheque made out to petty cash for an amount equal to the total amount (including HST) is given
- Cheque is cashed and money is added to petty box (difference with HST), ready to begin the next cycle
- Accounting entry must be made. (Dr all expenses with no HST and Cr Bank with total including HST)
What is internal control?
The set of accounting procedures established to protect the assets from theft and waste, ensure accounting data, encourage efficiency, and adhere to company policy
What are some ways a company can have good internal control?
-there should be different people recording the amount of physical assets vs the recorded amount
-all assets should be kept in a safe place
-only a few employees should be allowed to do transactions
-audits should occur often
-responsibilities should be clearly established in case of mistakes
What is bank reconciliation?
A routine procedure to determine why the balance on deposit in the bank doesn’t agree with the balance of cash shown by the company books
What is the bank reconciliation statement?
Shows the causes and difference between the bank balance and what’s shown on the ledger
What are the steps to make a bank reconciliation statement?
- have the bank statement, last month’s bank reconciliation statement, and the general ledger bank account
- title and then split into two column’s: Bank’s Record on the left and Company’s Record on the right
- Enter the ending balance from the bank statement on the left and ledger balance on the right
- Search and identify the discrepancy items on the statement, adding or subtracting as needed until the balances are the same
What is an outstanding cheque?
A cheque that has been issued and recorded by the company, but not yet cashed by the bank
What’s a late deposit?
A deposit that entered the books on the last day of the accounting period but did not make it to the statement
What’s a certified cheque?
When the bank takes the funds out of the issuer’s account in advance
What is a NSF cheque?
non-sufficient funds
What is a cash flow statement?
A financial statement that shows the inflow and outflow of cash during a fiscal period
What is cash flow?
The pattern of revenue and expenses of a business
List and describe the 3 sections of a cash flow statement.
-operating activities: the cash earned and lost from the business itself (ex: fees earned and expenses)
-investing activities: long-term assets that will determine how long the business will run (ex: property, plant, equipment)
-financing activities: both the borrowing and paying back of cash; for larger businesses also bonds and stocks
What do businesses usually do to reduce accounts payable?
Write a cheque
