西方财务会计chapter(2).ppt

CHAPTER5,CASHANDITSCONTROL,Introduction,Cashisoneoffinancialassets.Financialassetsincludecash,short-terminvestmentsandreceivables.Financialassetsareshowninthebalancesheetattheircurrentvalues.Currentvalueismeasureddifferentlyforeachtypeoffinancialasset.,Currentvalue,Thecurrentvalueofcashissimplyitsfaceamount.Thecurrentvalueofshort-terminvestments(marketablesecurities)iscurrentmarketvalue.(representsanexceptiontothecostprinciple)ThecurrentvalueofaccountsreceivableisNetrealizablevalue.,Introduction,-adequatesupplyofcashto-makevarietypayments-avoidcashshortagesduringbusinessexpansions-otherwisethebusinesshasrisksofinsolventandbankruptcy.-avoidskeepingexcessiveamountsonhandorinbanksbecausecashisanunproductiveassetunlessinvested.,Whyshouldabusinesscontrolcash?,Toensurethatsufficientcashisavailablewhenneededandthattoomuchcashisnotidle,managersmustplanandcontrolcarefullythecashneedsofthebusiness.Inaddition,becausecashisuniversallydesirable,agoodbusinessmustmaintaincarefulcontroloveritscashtoensurethatitisnotlostthroughfraudorembezzlement.,DefinitionofCash,Cashconsistsofdemanddeposits,currency,coins,moneyorders,andchecksawaitingdeposit.Demanddepositsarebankcheckingaccounts.Savingaccountsarecalledtimedeposits.Timedepositsareusuallyconsideredcashalthoughtheyareinrealitytemporaryinvestments.,DefinitionofCash,Thingsthataresometimesmistakenlyviewedascashbutthatarenotcashincludepostagestamps,postdatedchecks,checksreturnedbythebankforlackofsufficientfunds,andIOUsofemployeesandofficersforsmallamountsborrowedfromthecompany.,CashEquivalents,CombinedwithcashaccountintheB/S.Cashequivalentsincludesomeveryliquidshort-terminvestmentsCashequivalentsareverysafe,haveverystablemarketvalue,andmaturewithin90daysofthedateofacquisition.,Cashcontrolling,CashreceiptsCashpaymentsCashbalance,ControllingCashReceipts,1.Allreceiptsshouldbebankedpromptly.2.Receiptsfromcashsalesshouldbesupportedbysalestickets,cashregistertapes,andsoon.3.Accountabilityshouldbeestablishedeachtimewhencashistransferred.4.Personsreceivingcashshouldnotmakedisbursementsofcash,recordcashtransactions,orreconcilebankaccounts.,ControllingCashDisbursements,1.Alldisbursements,exceptpettycashpayments,shouldbemadebyprenumberedcheck.2.Vouchersandsupportingdocumentsshouldbesubmittedforreviewwhenchecksaresigned.3.Personswhosignchecksshouldnothaveaccesstocashreceipts,shouldnothavecustodyoffundsorrecordcashentries,andshouldnotreconcilebankaccounts.,Controllingcashbalance,BankreconciliationBankaccountsPettycash,PettyCash,ImprestfundForroutinesmalldisbursements.Amountscanvaryfrom$50orlesstomorethan$10,000.Alargeorganizationmayhaveseveralpettycashfundsinavarietyofofficesandproductionfacilities.,PettyCash(cont.),Thebalanceofthepettycashaccount,whichispartofthetotalcashbalance,changesonlywhenthefundisestablished,changedinamount,ordiscontinued.,PettyCashFund:steps,Establishment(entries)Makingsmallpayments(preparingpayoutvouchers)(noentries)Attheendoftheperiod,accountantsshouldmakeentriesforpaymentsandreplenishment.(includinganyCashshortorover),PettyCashFund:Example,1.Assumethata$3,000pettycashfundisestablished.PettyCash3,000Cash3,000,PettyCashFund:Example(cont.),2.Thecustodianreviewsauthorizationonvouchersforcashrequestsanddispensestherequiredcash.Thevouchersarekeptwiththefund.Thesumofcashandvouchersshouldequal$3,000.Journalentriesarenotmadefordisbursements.,PettyCashFund:Example(cont.),3.Attheendofthefirstmonth,assumethat$560remainsinthefund,indicatingthat$2,440wasdisbursedduringthemonth($3,000-$560)andthatthecustodianshouldhave$2,440insupportingpayoutvouchers.(2440payout+560remains=3000),PettyCashFund:Example(cont.),Theentrymadebytheaccountantisasfollow:PostageExpense900OfficeSuppliesExpense700TransportationExpense800Utilityexpense40Cash2,440,PettyCashFund:Example,Ifsomeerrorsoccur:Presumably,avoucherwaslost,oravoucherunderstatestheamountdisbursed.Thefollowingindividualvouchersaccompanythefund:postage,$900;officesupplies,$700;andtaxifares,$800($2,400intotal).Thereisa$40cashshortage($2,440-$2,400).,PettyCashFund:Example,Theshortageisreflectedinareplenishmententry:PostageExpense900OfficeSuppliesExpense700TransportationExpense800CashShortandOver40Cash2,440,PettyCashFund:Example,4.Whenapettycashfundisincreased,decreased,orclosed,anentryismadeaffectingboththepettycashandcashaccounts.Forexample,ifthefundisincreasedto$5,000becauseofincreasedofficecashneeds,theentryisasfollows:PettyCash2,000Cash2,000,TheBankReconciliation,Abanksendsitsdepositorsmonthlystatementsdescribingtheactivityofthedepositorsaccount.Thestatementincludesthecashbalanceintheaccountatthebeginningofthemonth,alistofdepositsmadeduringthemonth,alistofcheckspaidbythebankforthedepositor,andtheendingbalanceintheaccount.Inaddition,thebankalsolistsanyservicechargesthatithasdeductedfromtheaccountandothertransactionsthatmayhavetakenplace,suchasthecollectionofanotebythebankonbehalfofthedepositor.,TheBankReconciliation,Whenthedepositorreceivesthemonthlystatement,areconciliationshouldbepreparedtoexplainanydifferences(includingevitableandinevitabledifferencesbetweenthecashaccountintheledgerandthebankstatement.),Itemsonbooksbutnotonbankstatement,Outstandingchecks.Outstandingchecksarethoseissuedbythedepositorbutnotyetpresentedtothebankforpayment.Depositsintransit.Depositsintransitcomprisecashreceiptsrecordedbythecompanybuttoolatetobedeposited.,Itemsonbooksbutnotonbankstatement,Bookkeepingerrors.Bookkeepingerrorsariseinrecordingamountsofchecks;forexample,atranspositionoffigures.Theitemshouldbeaddedifitwaspreviouslyoverstated.Iftheitemwaspreviouslyunderstated,theamountshouldbededucted.,Itemsonbankstatementbutnotonbooks,Servicecharges.Thebankgenerallydeductsamountsforbankservices.Theexactamountisusuallynotknownbythedepositoruntilthestatementisreceived.NSF(nonsufficientfunds)checks.NSFcheckshavebeendepositedbutcannotbecollectedbecauseofinsufficientfundsintheaccountofthedrawerofthecheck.Thebankthenissuesadebitmemorandumchargingthedepositorsaccount.Collections.Thebankcollectsnotesandotheritemsforthedepositor.Thebankthenaddstheproceedstotheaccountandissuesacreditmemorandumtothedepositor.Oftenthereareunrecordedamountsattheendofthemonth.,Itemsonbankstatementbutnotonbooks,Bankerrors.Bankerrorsshouldnotbeenteredonthebooks.Theyshouldbebroughttotheattentionofthebankandcorrectedbythebank.,Stepsinpreparingabankreconciliation,1.prepareabankreconciliation,determinethattheadjustedbalanceofthebankstatementisequaltotheadjustedbalanceinthedepositorsrecords.2.Preparejournalentriestorecordanyitemsinthebankreconciliationlistedasadjustmentstothebalanceperdepositorsrecords.,8,8,8,5,Books(GLamount)Bankstatement(endofperiod)Plus:ReceiptsPlus:NotescollectedDepositsintransitInterestearnedErrorsErrorsLess:DisbursementsLess:NSFchecksOutstandingChecksServicechargesErrorsBankfeesErrors*EndBalanceofcash*EndBalanceofCash*Theabovefiguresshouldagree=“True”Cash,BankReconciliation,Example1(page.129)(cont.),ThefollowinginformationwasavailablewhentheGordonCompanybegantoreconcileitsbankbalanceonMay31.199x,balanceperdepositorsbooks,$9,983.80;balanceperbankstatement,$9,561.40;depositorintransit,$1,703.50;checksoutstandingNo.1385for$120.50,No.1386for$873.10andNo.1387for$401.50;bankservicecharge,$7.00;NSFcheckfor$134.00;bookkeepingerror$27overstatedfortelephoneexpense.,Example1(cont.),Example1,Journalentriesshouldbemadeforanyadjustmentstothebookaccounts.Tocompletethereconciliation,thefollowingtwojournalentrieswillbeneeded