Kap 16th Workbook Tech 10

Chapter 10
CASH AND INTERNAL CONTROLS
LEARNING OBJECTIVES
LO 10-1 Describe and apply internal controls for a LO 10-3 Prepare a bank reconciliation and related
business journal entries
LO 10-2 Apply cash controls LO 10-4 Prepare a petty cash fund and record
related journal entries
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Assessment Questions
AS-1 LO 10-1
What are internal controls? Explain.
Internal controls are the policies and procedures that a business uses to protect its assets, encourage effectiveness
and efficiency of operations, ensure that the accounting records are accurate, and ensure adherence to company
practices as well as compliance to laws and regulations.
AS-2 LO 10-1
List three reasons for designing internal controls in a company.

Answers will vary and may include any of the following: align managers and employees with the objectives of
the business; safeguard assets against loss, misuse and theft; prevent and detect fraud and error; encourage good
management practices; reduce exposure to risks; ensure compliance with financial reporting standards; and ensure
accuracy and validity of the accounting records.
AS-3 LO 10-1
What is segregation of duties?
Segregation of duties means that related duties should be performed by different people. Authorization, recording
and custody should be segregated.
AS-4 LO 10-2
What is bonding?
Bonding involves having an employee undergo a background check. It is a type of insurance that protects a
company against the fraudulent actions of an employee.
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Chapter 10 Cash and Internal Controls
AS-5 LO 10-2
Define cash equivalents.

A highly liquid investment made for three months (90 days) or less.
AS-6 LO 10-2
Briefly describe what it means to be in bank overdraft.
The cash available in a bank account is negative.
AS-7 LO 10-2
Describe the position of cash equivalents on the balance sheet.
They are listed below cash in the current assets section.
AS-8 LO 10-2
Why are cash equivalents entered with cash on the balance sheet?
They are short-term, highly liquid, and can be converted into cash quickly.
AS-9 LO 10-2
List three examples of cash equivalent items.
Cash equivalents include treasury bills, money market funds, commercial paper and short-term government bonds.
AS-10 LO 10-2
Why would a business invest in cash equivalents?
It would invest to earn a higher return than a regular bank account.
AS-11 LO 10-2
What are the three different ways a business usually receives cash from customers?
A business can receive cash directly from customers when the products or services are sold. Customers may also
pay by credit card or debit card, in which case the business receives the funds through the bank about two days
later. The third way is from credit sales when a customer pays on account after an invoice has been issued for
products or services. Payment may be made by sending it in the mail or by sending it electronically.
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Cash and Internal Controls Chapter 10
AS-12 LO 10-2
Considering controls for a cash sale, what is important for the customer to do as part of the transaction?
When a receipt is provided, the customer is expected to examine the receipt to ensure that it reflects the correct
amount of cash paid.
AS-13 LO 10-2
Describe how a business can protect cash on its premises.
A business can keep cash in a safe area such as a locked office, lock box or safe that only select employees have
access to. A business can also make regular, frequent deposits to remove cash from the premises. Security can
be employed to protect the premises and transport cash from a business to a bank. Cheques received should be
stamped “for deposit only” on the back to discourage fraudulent cashing of cheques.
AS-14 LO 10-2
What is the overall goal of a business in managing its cash?
The overall goal is to ensure that the cash received is the same amount of cash recorded, which in turn is the
same amount of cash deposited.
AS-15 LO 10-2
What is a remittance advice on an invoice?

It is a detachable part of the invoice that is returned along with the customer’s payment. A remittance advice
includes details such as the customer’s account number, the amount of payment requested and the date the
payment is due.
AS-16 LO 10-2
What is a voucher system for cash payments?

It is a set of control procedures that a business uses to authorize, record and disburse cash payments.
AS-17 LO 10-3
What is a bank reconciliation?

A bank reconciliation is part of an internal control process where the differences between a company’s bank
statement and its own cash accounting records are compared, reconciled and explained.
AS-18 LO 10-3
List three typical reasons for a bank to make additional deductions from a company’s cash account.
Reasons for a bank to make additional deductions from a company’s cash account include loan interest charges,
repayment of a bank loan (note payable), bank charges, payments by electronic funds transfer (EFT), automatic
cash payments to other accounts, and non-sufficient funds (NSF) cheques.
557
AS-19 LO 10-3
What are two typical reasons for a bank making additional deposits to a company’s cash account?
Reasons for a bank to make additional deposits to a company’s cash account include interest earned on the
depositor’s account, payment from a customer deposited directly into the account, deposits by electronic funds
transfer (EFT), automatic cash deposits from other accounts, proceeds from collection of notes receivable, and
corrections of bank errors.
AS-20 LO 10-3
In a typical bank reconciliation, what are the titles of the two column headers?
• Cash balance per bank statement
• Cash balance per company books
AS-21 LO 10-3
What are non-sufficient funds (NSF) cheques?

NSF cheques are payments made to the company by a customer that does not have sufficient funds in a bank
account to cover the amount of the cheque.
AS-22 LO 10-3
What is an outstanding deposit?

An outstanding deposit is one that has been recorded in the company’s general ledger but is not shown on the
bank statement.
AS-23 LO 10-3
When is a journal entry required during a bank reconciliation?

A journal entry is required if an adjustment is made in the “Ledger” balance in the bank reconciliation.
AS-24 LO 10-3
How are outstanding cheques recorded on the bank reconciliation?

Outstanding cheques are subtracted from the bank balance.
AS-25 LO 10-4
What is an imprest system for petty cash?

An imprest system for petty cash ensures that spending is limited to the amount available in the petty cash fund.
AS-26 LO 10-4
Briefly describe the responsibilities of the petty cash custodian.
The petty cash custodian ensures that petty cash is properly safeguarded and disbursed for legitimate reasons and
that an accurate record is maintained for all activities related to the fund.
558
AS-27 LO 10-4
What does an employee who requires petty cash need to present to the petty cash custodian?
Any employee who requires petty cash needs to provide a receipt from the supplier indicating the amount of
money spent and the reason for the purchase.
AS-28 LO 10-4
What is a petty cash summary sheet?
A petty cash summary sheet is a detailed list of funds reimbursed.
AS-29 LO 10-4
Why do petty cash overages or shortages occur?
These discrepancies can result from a miscount of coins or an overpayment during the period.
AS-30 LO 10-4
When does the cash over and short account behave like an expense account?
The cash over and short account behaves like an expense account when there is a shortage.
AS-31 LO 10-4
List two general controls that can be used for petty cash.
Answers may include any of the following: establish guidelines; maintain documentation; review the rules with
employees; appoint a petty cash custodian; and periodically count the petty cash fund.
AS-32 LO 10-4
What are the only two times that the petty cash account in the ledger is debited or credited?
The petty cash account in the ledger is debited or credited when the account is established and when the float
amount is increased or decreased.
559
Practice Questions
PR-1 LO 10-2
On June 26, Sky Tours counted the cash received from the day’s tours and sales from the gift shop. Cash sales
totalled $4,250.50. Cash counted in the till came to $4,249.75. The company has a policy that any discrepancies
between sales and total cash that are $2.00 or less are recorded in the cash over and short account and do not
have to be investigated. Record the cash sales for the day.
JOURNAL
Date Account Title and Explanation Debit Credit
Jun 26 Cash 4,249.75
Cash Over and Short 0.75
Service Revenue 4,250.50
To record cash sales
PR-2 LO 10-2
On August 8, Landmark Retailer counted $8,526.70 cash received from the day’s sales. According to the registers,
cash sales totalled $8,525.40. The company has a policy that any discrepancies between sales and total cash that
are $2.00 or less are recorded in the cash over and short account and do not have to be investigated. Record the
cash sales for the day.
JOURNAL
Aug 8 Cash 8,526.70
Service Revenue 8,525.40
To record cash sales
PR-3 LO 10-3
Quality Electronic is preparing a bank reconciliation and has identified the following potential reconciling items.
For each item, indicate the appropriate action:
• Add to the balance of the ledger
• Deduct from the balance of the ledger
• Add to the balance of the bank statement
• Deduct from the balance of the bank statement
Item Action
Deposits that are not shown on the bank statement Add to the balance of the bank statement
Interest deposited to the company’s account Add to the balance of the ledger
Bank service charges Deduct from the balance of the ledger
Outstanding cheques Deduct from the balance of the bank statement
NSF cheques returned Deduct from the balance of the ledger
560
PR-4 LO 10-3
Sweet Shop had the following information at the end of October 2022.
GENERAL LEDGER
Account: Cash GL No: 101
Date Description DR CR Balance
Oct 1 Opening Balance 16,700 DR
Oct 1 Deposit 2,400 19,100 DR
Oct 7 Cheque #62 1,900 17,200 DR
Oct 18 Cheque #63 650 20,750 DR
Oct 23 Cheque #64 900 19,850 DR
Oct 27 Cheque #65 1,100 18,750 DR
BANK STATEMENT
Date Explanation Withdrawal Deposit Balance
Oct 1 Opening Balance 16,700
Oct 2 Deposit 2,400 19,100
Oct 8 Cheque #62 1,900 17,200
Oct 13 Deposit 4,200 21,400
Oct 18 Cheque #63 650 20,750
Oct 23 Cheque #64 900 19,850
Oct 31 Service Charge 75 19,775
Oct 31 Interest 50 19,825
Prepare a bank reconciliation for the month of October.

Sweet Shop
Bank Reconciliation
October 31, 2022
Cash balance per bank statement $19,825 Cash balance per books $21,590
Add Add
Outstanding deposit 2,840 Interest earned 50
Deduct outstanding cheques Deduct
Cheque #65 1,100 Service charge 75
Adjusted bank balance $21,565 Adjusted book balance $21,565
561
PR-5 LO 10-3
Parrot Website Design had the following information at the end of December 2022.
GENERAL LEDGER
Date Description DR CR Balance
Dec 1 Opening Balance 10,200 DR
Dec 1 Deposit 2,400 12,600 DR
Dec 7 Cheque #85 1,900 10,700 DR
Dec 12 Deposit 800 11,500 DR
Dec 18 Cheque #86 650 10,850 DR
Dec 23 Cheque #87 900 9,950 DR
Dec 27 Cheque #88 1,100 8,850 DR
BANK STATEMENT
Date Explanation Withdrawal Deposit Balance
Dec 1 Opening Balance 10,200
Dec 2 Deposit 2,400 12,600
Dec 8 Cheque #85 1,900 10,700
Dec 13 EFT from Customer 1,500 12,200
Dec 14 Deposit 800 13,000
Dec 15 NSF Cheque 800 12,200
Dec 15 NSF Charge 20 12,180
Dec 18 Cheque #86 650 11,530
Dec 31 Cheque #87 900 10,630
Prepare a bank reconciliation for the month of December.

Parrot Website Design
Bank Reconciliation
December 31, 2022
Add Add
Outstanding deposit 2,840 EFT from customer 1,500
Cheque #88 1,100 NSF Cheque 800
NSF Charge 20 820
562
PR-6 LO 10-3
The accountant for Buildit Architecture has completed the bank reconciliation for April 2022, as shown below. Prepare
any required journal entries.
Buildit Architecture
Bank Reconciliation
April 30, 2022
Add Add
Outstanding deposit 1,600 EFT deposit from customer 600

Cheque #154 500 Bank service charge 10
Cheque #158 600 1,100
JOURNAL
Apr 30 Cash 600
Accounts Receivable 600
To record EFT from customer
Apr 30 Bank Charges Expense 10

Cash 10
To record bank charges
PR-7 LO 10-3
The accountant for Summer Retailer has completed the bank reconciliation for November 2022, as shown below.
Prepare any required journal entries.
Summer Retailer
Bank Reconciliation
November 30, 2022
Add Add
Outstanding deposit 2,450 Interest earned 5

Cheque #268 985 EFT rent payment 1,100
563
JOURNAL
Nov 30 Cash 5
Interest Revenue 5
To record interest earned
Nov 30 Rent Expense 1,100

Cash 1,100
PR-8 LO 10-4
On May 3, 2022, Bike Tours established a petty cash fund for $400. Prepare the journal entry.
JOURNAL
May 3 Petty Cash 400
Cash 400
To establish the petty cash fund
PR-9 LO 10-4
On June 30, 2022, Sasha’s Design decided to increase the petty cash fund from $300 to $500. Prepare the journal entry.
JOURNAL
Jun 30 Petty Cash 200
Cash 200
To increase the petty cash fund
PR-10 LO 10-4
Hazel’s Chocolates is preparing to replenish its petty cash fund. The fund was initially set up with $100. In the
petty cash box, there is currently $12, plus a receipt for $45 for office supplies and a receipt for $40 for delivery.
Identify if the petty cash fund is over or short, and by how much.
There should be $15 remaining in the petty cash fund ($100 − $45 − $40). Since there is only $12, that means the
petty cash fund is short by $3.
564
PR-11 LO 10-4
Mohammad’s Motors has a petty cash fund of $150. On July 26, 2022, there was $25 in the petty cash box, plus
the following receipts.
Office Supplies $60

Maintenance $25
Delivery $40
Prepare the journal entry to replenish the petty cash fund.
JOURNAL
Jul 26 Offices Supplies Expense 60
Maintenance Expense 25
Delivery Expense 40
Cash 125
To replenish the petty cash fund
565
Application Questions Group A

AP-1A LO 10-1, 2
Gordon Green operates a golf ball driving range called Greenaway Golf, open from May 1 to November 1. Gordon
employs two people, one who works from 6 a.m. until 2 p.m. and the other who works from 2 p.m. to close at 10
p.m., 7 days a week. The two employees are cousins of Gordon, so he saw no reason to have to bond them. The
office and equipment are located in a trailer at the front of the property, close to the road and parking lot. Gordon
takes pride in the fact that he accepts only cash and pays all his bills using cash. No cheques or credit cards may
be used by customers for sales or by his staff when paying bills. Gordon keeps all cash on the premises until he
counts it and prepares a bank deposit once per week.
List all of the internal control weaknesses with Gordon’s business.
Note to instructor: Student answers may vary from solution.
1. Should have more than 2 employees who are trained to operate the business in the event one of the two
regular employees is unavailable for their shift
2. All employees should be bonded, regardless of their relationship with the owner
3. Office and equipment should be located at the back of the property, away from the highway and easy
access in the event a theft occurs
4. Should consider allowing customers to use debit/credit cards to increase revenue
5. Should pay bills with cheque/credit card where feasible
6. Cash should be removed from premises at night. Excess cash should also be removed during day when
possible
7. Should deposit money in bank more frequently than once per week, especially during peak times (summer)
AP-2A LO 10-2
A business dealing with cash transactions needs to ensure adequate internals controls are in place to protect this
asset from loss due to theft or error. Identify which control would be the most effective in preventing/detecting
violations of internal controls over cash in each of the following scenarios.
Cash Control
1. Invest idle cash into highly liquid investments
2. Use EFT for cash payments
3. Allow customers to deposit cheques directly into company bank account
4. Provide each cashier with their own cash drawer with a predetermined amount of cash included at the
beginning of their shift
5. Display sale amounts for customers to see while sale is being keyed into cash register
6. Provide customer with a remittance copy of their statement that can be sent with payment to ensure it is applied
to the correct account
7. Have cashier prepare a duplicate bank deposit slip, where one copy goes with the deposit to the bank and is
stamped as verified and then returned to the business for filing
8. Use a cash over and short account to account for differences due to rounding
9. Require that all cash payments are independently authorized
10. Prepare monthly bank reconciliation
566
Scenario
5 Customers claim they have been overcharged for items.
3 Customers have difficulty getting their payment to the business because of their remote location.
9 The business owner is concerned unauthorized payments are being made.
10 The balance of the business bank account at the end of the year does not agree with the balance reported in
the general ledger cash account.
8 The account is used to track discrepancies in cash received for cash sales with actual amount of sales.
6 Customer payments received in the mail are not getting posted to their account properly.
7 The amount of a bank deposit does not agree with what was prepared by the cashier.
4 Errors are being made by one of the cashiers, but it is difficult to determine who, since four cashiers use the
same cash register during the day.
1 The balance of cash is consistently the highest of all assets.
2 Monthly payments for things like insurance or utility bills are sometimes missed.
AP-3A LO 10-2
The Toonie Treasure operates a local store that sells a variety of items with nothing costing more than $10.00.
Arjun Sing, the bookkeeper, is unsure of how to record cash transactions when the total is rounded to the nearest
nickel. For example, the following transactions were recorded the week of March 7–12, 2022.
Day Cash received Total sales

Monday $325.28 $325.30
Tuesday 234.56 234.60
Wednesday 434.02 434.05
Thursday 572.02 572.00
Friday 540.03 540.05
Saturday 586.01 586.08
Totals $2,691.92 $2,692.08
Arjun has come to you for advice on how to record the above in one entry at the end of the week. Explain what
accounts are used and show how the journal entry is recorded.
In addition to debiting the cash account, Arjun also needs to debit the cash over and short account to account for
the discrepancy in the total cash received and total sales.
JOURNAL
2022
Mar 12 Cash 2,691.92
Cash Over & Short 0.16
Sales 2,692.08
To record cash sales for the week
567
AP-4A LO 10-3
In preparing its bank reconciliation for the month of June 2022, Happy Tail Dog Grooming has the following
information available.
Balance per bank statement of June 30 $34,140
NSF cheque returned with June 30 bank statement 450
Deposits in transit as of June 30 5,000
Outstanding cheques as of June 30 5,200
Bank service charges for June 20
What is the correct balance of cash at June 30, 2022?

Balance per bank statement of June 30 $34,140
Add: Deposits in transit as of June 30 5,000
Deduct: Outstanding cheques as of June 30 (5,200)
Correct cash balance at June 30 $33,940
AP-5A LO 10-3
Global Services prepared the following bank reconciliation for May 2022.
Global Services
Bank Reconciliation
May 31, 2022
Add outstanding deposit 2,985
Deduct outstanding cheques 1,644
The records for June show the following transactions. Assume all the outstanding deposits and cheques in May are
accounted for before the end of June.
Transaction Per Bank Per Books

Balance on June 30 $8,880 $10,131
June deposits 7,985 6,985
June cheques 4,150 3,365
June bank service charge 25
June NSF cheque from a customer 100
Determine the amount of outstanding deposits and outstanding cheques at the end of June.
Calculation of outstanding deposits

Deposits per company books $6,985
Deposits per bank in June $7,985
Less: Outstanding deposits from May (2,985)
Deposits processed in June 5,000
Outstanding deposits at end of June $1,985
Calculation of outstanding cheques

Cheques written per company books $3,365
Cheques cleared by bank in June $4,150
Less: Outstanding cheques from May (1,644)
Cheques processed in June 2,506
Outstanding cheques at end of June $859
568
AP-6A LO 10-3
The following data represents information necessary to assist in preparing the June 30, 2022, bank reconciliation
for Trimore Company.
• The June 30 bank balance was $5,300.
• The bank statement indicated a deduction of $20 for all bank service charges.
• A customer deposited $1,200 directly into the bank account to settle an outstanding accounts receivable bill.
• Cheque #850 for $600 and Cheque #857 for $420 have been recorded in the company ledger but did not appear on the
bank statement.
• A customer paid an amount of $4,534 to Trimore on June 30, but the deposit did not appear on the bank statement.
• The accounting clerk made an error and recorded a $200 cheque as $2,000. The cheque was written to pay the
outstanding accounts payable account.
• Cheque #9574 for $100 was deducted from Trimore’s account by the bank. This cheque was not written by Trimore and
needs to be reversed by the bank.
• The bank included an NSF cheque in the amount of $820 relating to a customer’s payment. The NSF service fee was $10.
• The general ledger cash account showed a balance of $6,764 on June 30.
Required
a) Complete the bank reconciliation for Trimore Company.
Trimore Company
Bank Reconciliation
June 30, 2022
Add Add
Outstanding deposit 4,534 EFT deposit 1,200
Bank error 100 4,634 Ledger error 1,800 3,000

Cheque #850 600 NSF Cheque 820
Cheque #857 420 1,020 NSF service charge 10
Bank service charges 20 850
b) Write the necessary journal entries to correct Trimore’s records.
JOURNAL
2022
Jun 30 Bank Charges Expense 20
Cash 20
Jun 30 Cash 1,200

Accounts Receivable 1,200
To record collection of accounts receivable
Jun 30 Cash 1,800

Accounts Payable 1,800
To correct the record of accounts payable
569

Jun 30 Accounts Receivable 820
Cash 820
To record NSF cheque
Jun 30 Bank Charges Expense 10

Cash 10
To record NSF fee
AP-7A LO 10-3
Mike’s Cleaning Service received its monthly bank statement for its business bank account, with a balance of
$55,062 for the month of July 2022. The balance of the ledger account as at July 31, 2022, was $59,461.
After a comparison of the cheques written by the company and those deducted from the bank account, Mike’s
accountant determined that three cheques, totalling $2,806 (Cheque #256 for $606, Cheque #261 for $1,200, and
Cheque #262 for $1,000), were outstanding on July 31. A review of the deposits showed that a deposit on July 1 for
$12,610 was actually recorded in the company’s ledger on June 30 and a July 31 deposit of $9,760 was recorded in
the company’s ledger but had not yet been recorded by the bank. The July bank statement showed a total service
fee of $18, a customer’s cheque in the amount of $70 that had been returned NSF, a loan payment of $857 that was
deducted automatically by the bank, and a $3,500 payment from a customer that was deposited directly into the
Mike’s Cleaning bank account.
Required
a) Prepare the bank reconciliation as at July 31, 2022.
Mike’s Cleaning Service
Bank Reconciliation
July 31, 2022
Add outstanding deposit 9,760 Add EFT deposit 3,500

Cheque #261 1,200 Repayment of loan 857
Cheque #262 1,000 2,806 Bank service charges 18 945
b) How much cash does Mike’s Cleaning Service actually have in its cash account on July 31?
On July 31, Mike’s Cleaning Service actually has $62,016 in its cash account.
c) Prepare journal entries to record all necessary adjustments to bring the cash account to its adjusted balance.
JOURNAL
2022
Jul 31 Cash 3,500
To correct collection of notes receivable
570

Jul 31 Bank Charges Expense 18
Cash 18
To record bank service charges
Jul 31 Accounts Receivable 70

Cash 70
To record NSF cheque charged back
Jul 31 Loan Payable 857

Cash 857
To record loan payment
AP-8A LO 10-3
The following data represents information necessary to assist in preparing the January 31, 2022, bank reconciliation
for Sellmore Company.
• The January 31 bank balance was $4,598.

• A customer deposited $900 directly into the bank account to settle an outstanding accounts receivable bill.
• The bank statement indicated a deduction of $33 for all bank service charges.
• Cheque #821 for $360 and Cheque #865 for $252 have been recorded in the company ledger but did not appear
on the bank statement.
• A customer paid $4,589 to Sellmore on January 31 but the deposit did not appear on the bank statement.
• The accounting clerk made an error and recorded a $180 cheque as $1,800. The cheque was written to pay the
outstanding accounts payable account.
• The bank included an NSF cheque in the amount of $710 relating to a customer’s payment.
• Cheque #9504 for $153 was deducted from Sellmore’s account by the bank. This cheque was not written by
Sellmore and needs to be reversed by the bank.
• The general ledger cash account showed a balance of $6,951 on January 31.
Required
a) Complete the bank reconciliation for Sellmore Company.
Sellmore Company
Bank Reconciliation
January 31, 2022
Add Add
Outstanding deposit 4,589 EFT deposit 900
Bank error 153 4,742 Ledger error 1,620 2,520

Cheque #865 252 612 Bank service charges 33 743
571
b) Write the necessary journal entries to correct Sellmore’s records.
JOURNAL
2022
Jan 31 Cash 900
To record collection of accounts receivable
Jan 31 Bank Charges Expenses 33

Cash 33
Jan 31 Cash 1,620

To correct the record of accounts payable
Jan 31 Accounts Receivable 710

Cash 710
AP-9A LO 10-3
Use the following information to prepare the bank reconciliation for Jeremiah Motors.
• The bank balance on March 31 was $13,500.
• The general ledger cash account showed a balance of $14,950 on March 31.
• Received Cheque #80 from a customer for $950, but it has not been deposited yet.
• The bank statement shows a charge of $110 for all bank service fees.
• A customer transferred $800 directly into the company’s bank account to pay their account.
• Recorded Cheque #94 to pay for supplies in the journal as $480 instead of $840.
• The bank statement showed an NSF cheque from a customer for $830.
Required
a) Complete the bank reconciliation for Jeremiah Motors.
Jeremiah Motors
Bank Reconciliation
March 31, 2022
Add outstanding deposit 950 Add EFT deposit 800
Deduct
Bank service charges 110
Ledger error 360
NSF Cheque 830 1,300
572
b) Prepare any necessary journal entries to update the company’s records for March 2022.
JOURNAL
2022
Mar 31 Service Charge Expense 110
Cash 110
To record service charges
Mar 31 Cash 800

To record deposit from customer
Mar 31 Supplies Expense 360

Cash 360
To record error on Cheque #94
Mar 31 Accounts Receivable 830

Cash 830
AP-10A LO 10-3
Maria has been given the general ledger and bank statement for Cotton Company. Help her prepare the bank
reconciliation based on the two documents on October 31, 2022.
GENERAL LEDGER

Date Description Debit Credit Balance
Oct 7 Cheque #214 8,000 10,210 DR
Oct 9 Cheque #400—Equipment 400 9,810 DR
Oct 16 Cheque #401—Inventory 540 9,270 DR
Oct 19 Cheque #18 3,200 12,470 DR
Oct 27 Cheque #402—Office Supplies 810 11,660 DR
Oct 30 Cheque #403 – Repairs & Maintenance Expense 300 11,360 DR
BANK STATEMENT
Date Description Withdrawal Deposit Balance
Oct 7 EFT—Rent payment 1,000 1,210
Oct 9 Cheque #400 400 810
Oct 16 Cheque #401 540 270
Oct 19 Cheque #18 3,200 3470
Oct 19 NSF—Cheque #18 3,200 270
Oct 19 NSF Charge 30 240
Oct 30 Cheque #402 180 60
Oct 31 Interest 50 110
573
Note: In case of any discrepancy between dollar amounts, assume the bank statement is correct.
Cotton Company
Bank Reconciliation
October 31, 2022
Cash balance per bank statement $110 Cash balance per books $11,360
Add outstanding deposit 8,000 Add

Interest on bank account 50
Cheque error #402 630 680

Cheque #403 300 EFT—Rent 1,000
NSF Cheque 3,200
NSF service charge 30 4,230
AP-11A LO 10-3
For the month of October 2022, Jasmine Kaur noticed that the bank processed a cheque that she was not aware
of. She called the bank and determined that the cheque belongs to another account. The following is the general
ledger report for cash in the bank and the bank statement for Kaur Productions for the month of October.
GENERAL LEDGER

Oct 6 Sugar Creations—Cheque #600 800 1,930 DR
Oct 6 Office Manager—Cheque #601 565 1,365 DR
Oct 10 Cameron Connor—Cheque #450 1,200 2,565 DR
Oct 25 Book Store—Cheque #602 500 2,065 DR
Bank Statement
Oct 10 Cheque #600 800 1,930
Oct 10 Cheque #601 565 1,365
Oct 14 Cheque#450 1,200 2,565
Oct 20 Cheque #6107 650 1,915
Oct 30 Cheque #602 500 1,415
Identify the cheque that does not belong to Kaur. Explain why a journal entry is not required to correct the
mistake.
The bank has mistakenly processed Cheque #6107. No journal entry is required since an adjustment needs to be
made only by the bank.
574
AP-12A LO 10-3
Lux Transportation Services has just received its bank statement for the month and has compared it to the general
ledger cash account.
GENERAL LEDGER
Oct 2 Cheque #401 750 12,350 DR
Oct 5 Cheque #220 900 13,250 DR
Oct 8 Cheque #403 750 12,500 DR
Oct 16 Cheque #404 200 12,300 DR
BANK STATEMENT
Oct 2 Cheque #401 750 12,350
Oct 6 Cheque #220 900 13,250
Oct 6 EFT Rent Payment 750 12,500
Oct 10 Cheque #403 750 11,750
Oct 16 Cheque #88 445 12,195
Oct 30 Interest 50 12,245
Oct 31 Service Charge 110 12,135
Prepare the bank reconciliation for Lux Transportation as at October 31, 2022.
Lux Transportation
Bank Reconciliation
October 31, 2022
Add
Unrecorded Cheque #88 445
Interest on bank account 50 495

Cheque #404 200 EFT Rent Payment 750
Analysis
After some investigation, it is discovered that Cheque #88 is not from a customer and should not have been
deposited into the company’s bank account by the bank. How does this discovery change the bank reconciliation
and any necessary journal entries?
Instead of being added to the General Ledger column on the bank reconciliation, the amount should be deducted
from the Bank column. This will change the corrected balances to $11,490. Lux Transportation would have had to
prepare a journal entry to record the cheque before, but now it does not.
575
AP-13A LO 10-3
Consider the following general ledger and bank statement for Meena Salon.
GENERAL LEDGER
Apr 1 Opening Balance 8,000 DR
Apr 6 Jimmy Supplies—Cheque #101 500 7,500 DR
Apr 10 HitHit Supplies—Cheque #102 1,000 6,500 DR
Apr 11 Mary Malony 250 6,750 DR
Apr 14 Inner Beauty Inc.—Cheque #103 757 5,993 DR
Apr 19 Shona Care Ltd.—Cheque #104 840 5,153 DR
Apr 29 Deposit 2,500 7,653 DR
BANK STATEMENT
Apr 1 Opening Balance 8,000
Apr 6 Cheque #101 500 7,500
Apr 10 Cheque #102 1,000 6,500
Apr 10 EFT—Monthly rent 800 5,700
Apr 11 Mary Malony 250 5,950
Apr 11 NSF Cheque 250 5,700
Apr 11 NSF charge 5 5,695
Apr 14 Cheque #103 575 5,120
Apr 21 Cheque #1520 3,000 2,120
Apr 30 Service charges 25 2,095
Apr 30 Interest on bank account 20 2,115
Additional Information
1. On April 14, Meena Salon purchased $575 worth of salon supplies from Inner Beauty Inc.
2. The salon’s cheque numbers are always three digits in length.
Required
a) Prepare a bank reconciliation for Meena Salon on April 30, 2022.
Meena Salon
Bank Reconciliation
April 30, 2022
Add Add
Outstanding deposit 2,500 Interest on bank account 20
Bank error 3,000 5,500 Ledger error 182 202

Cheque #104 840 EFT—Rent 800
NSF Cheque 250
NSF service charge 5
Bank service charges 25 1,080
576
b) Prepare the necessary journal entries.
JOURNAL
2022
Apr 30 Cash 182
Salon Supplies 182
To correct error on Cheque #103
Apr 30 Cash 20
Interest Revenue 20
To record interest earned for the month of April
Apr 30 Rent Expense 800

Cash 800
To record ETF—monthly rent
Apr 30 Accounts Receivable 250

Cash 250
To record NSF cheque returned by bank

Cash 5
To record bank charges for NSF cheque

Cash 25
To record service charges for the month of April
AP-14A LO 10-3
The bookkeeper for Brose Industrial Supply has prepared a bank reconciliation for the month but, although it
balances, it is not correct. Prepare a corrected bank reconciliation for Brose Industrial Supply. Assume that all
figures show the correct dollar amounts, and that the opening balances are both correct.
Brose Industrial Supply

Bank Reconciliation
July 31, 2022
Ledger Bank
Opening Balance $14,630 $16,070
Add:
Interest earned 100
Less:
Outstanding cheques (1,600)
Outstanding deposits (730)
Unrecorded deposit (550)
Reconciled Balance $14,000 $14,000
577
Brose Industrial Supply

Bank Reconciliation
July 31, 2022
Add outstanding deposit 730 Add

EFT deposit 550
Interest earned 100 650
Deduct outstanding cheques 1,600 Deduct bank service charges 80
Analysis
After preparing a bank reconciliation, journal entries must be prepared to record adjustments to cash. Name three
items that require an adjusting entry. Why don’t all items on the reconciliation require adjusting entries?
Unrecorded deposits, EFTs, NSF cheques, bookkeeper errors, interest, and service fees all require adjusting entries.
Some items on the bank reconciliation do not require entries because they have already been recorded earlier in
the journal, but not yet by the bank.
AP-15A LO 10-3
Shine Laundry’s bank reconciliation is provided for the month of September 2022. However, due to some errors on
the bank reconciliation, the reconciled balance for the ledger and the bank are different from each other.
Shine Laundry
Bank Reconciliation
September 30, 2022
Ledger Bank
Add: Outstanding deposit—Sep 29 400
Outstanding deposit—Sep 30 1,220
Less: Outstanding Cheque #3—Sep 8 (1,000)
Outstanding Cheque #4—Sep 10 (600)
EFT—Insurance—Sep 15 (400)
EFT—Monthly rent—Sep 18 (600)
NSF Cheque—Sep 19 (250)
Charges for NSF Cheque—Sep 19 (5)
Service charges—Sep 30 (15)
Interest on bank account—Sep 30 (10)
578
Required
a) Prepare a corrected bank reconciliation. Assume the dollar amounts of the individual items on the bank
reconciliation are correct.
Shine Laundry
Bank Reconciliation
September 30, 2022
Add Add interest on bank account 10

Outstanding deposit—Sep 29 400
Outstanding deposit—Sep 30 1,220 1,620

Cheque #3 1,000 EFT—Insurance 400
Cheque #4 600 1,600 EFT—Rent 600
NSF Cheque 250
b) Prepare all journal entries required by Shine Laundry.
JOURNAL
2022
Sep 30 Cash 10
Interest Revenue 10
To record interest earned for the month of September
Sep 30 Insurance Expense 400

Cash 400
To record ETF— monthly insurance
Sep 30 Rent Expense 600

Cash 600
Sep 30 Accounts Receivable 250

Cash 250
Sep 30 Bank Charges Expense 5

Cash 5
Sep 30 Bank Charges Expense 15

Cash 15
To record service charges for the month of September
579
AP-16A LO 10-4
Nada Services established a petty cash fund on January 1, 2022. The fund was set up to increase the efficiency of
accounting for small cash transactions and to tighten internal controls over many of the small expenditures the
business makes. Nada decided to set up the petty cash fund for $500. A cheque was issued for this amount and
given to the petty cash custodian.
During January, the petty cash custodian made the following disbursements and placed a receipt for each in the
cash box provided. The related accounts impacted are also given.
Description Amount Related Account

Tim Hortons coffee order for a management meeting $26.50 Administration Expense
Supplies purchased 18.30 Office Supplies Expense
Freight charge to ship goods to a customer 119.00 Delivery Expense
Travel advances to employees for short business trips 225.00 Gasoline Expense
Card, wrapping paper for gift for employee in hospital 25.00 Administration Expense
The petty cash was replenished on January 21 when the amount of cash in the fund was $85.36. On April 1,
management decided to increase the fund to $700.
Prepare the journal entries to establish the petty cash fund, to reimburse it on January 21 and to increase the fund
in April.
JOURNAL
2022
Jan 1 Petty Cash 500.00
Cash 500.00
To set up the petty cash fund
Jan 21 Office Supplies Expense 18.30

Delivery Expense 119.00
Gasoline Expense 225.00
Administration Expense 51.50
Cash Over and Short* 0.84
Cash 414.64
To reimburse petty cash
Apr 1 Petty Cash 200.00

Cash 200.00
To increase the petty cash fund to $700
*Cash Over and Short calculation: $500.00 in petty cash − $413.80 in receipts = $86.20; $86.20 − $85.36
remaining in petty cash = $0.84
580
AP-17A LO 10-4
The petty cash fund was established on August 12, 2022, in the amount of $250. Expenditures from the fund by
the custodian as of August 31, 2022, were evidenced by approved receipts for the following.
Postage Expense $30.00
Supplies Expense 65.00
Maintenance Expense 42.00
Newspaper Advertising 21.95
Miscellaneous Expense 15.75
On August 31, 2022, the petty cash fund was replenished and increased to $300; currency and coin in the fund at
that time totalled $15.60.
Prepare the journal entries to record the transactions related to the petty cash fund for the month of August.
JOURNAL
2022
Aug 12 Petty Cash 250
Cash 250
Aug 31 Postage Expense 30.00

Supplies Expense 65.00
Maintenance Expense 42.00
Advertising Expense 21.95
Petty Cash 50.00
Cash 284.40
AP-18A LO 10-4
On June 7, 2022, Mary decided to set up a petty cash fund for her small business. A cheque of $125 was issued
and cashed. The $125 cash was given to the store supervisor who was to act as petty cash custodian. The petty
cash custodian was told to obtain authorized vouchers for all payments. Petty cash was to be replenished when
the balance in the cash box reached $23.
Required
a) Record the establishment of the fund on June 7.
JOURNAL
2022
Cash 125
581
b) On June 19, the following summary was prepared.
Delivery Expense $50.90

Office Expense 24.10
Postage Expense 6.60
Total $102.00
Prepare the entry to replenish the petty cash.

JOURNAL
2022
Jun 19 Delivery Expense 50.90
Office Expense 24.10
Cash 102
c) On June 23, it was decided to increase the amount of the petty cash fund from $125 to $175. A cheque of $50 was
issued. Record the transaction.
JOURNAL
2022
Cash 50
To increase the petty cash float
AP-19A LO 10-4
On June 29, 2022, Fire It Up Grill decided to establish a petty cash fund for the office. A cheque for $250 was
issued and cashed. The $250 cash was given to the office manager who was to act as the petty cash custodian. He
decided that the petty cash fund should be replenished when the balance in the cash box reached $70.
Required
a) Record the establishment of the petty cash fund on June 29.
JOURNAL
2022
Cash 250
To set up petty cash fund
b) On July 31, the balance in the petty cash account was $70. A summary of the expenses was prepared.
Delivery Expense $68

Office Supplies Expense 96
Miscellaneous Expense 10
Postage Expense 7
Total $181
582
Determine the balance of the petty cash fund after all transactions have occurred for the month of July.
$250 – 181= $69
c) Prepare the journal entry to replenish the petty cash fund.
JOURNAL
2022
Jul 31 Delivery Expense 68
Office Supplies Expense 96
Postage Expense 7
Cash Over and Short 1
Cash 180
To replenish petty cash fund
d) Based on your response from part c), determine if the cash amount is over or short.
The cash amount is over.
e) On July 31, with input from the petty cash custodian, management decided to increase the amount of the
petty cash fund from $250 to $350. This was based on the fact that more items were approved to be paid by
petty cash. A cheque for $100 was issued and cashed. Record the transaction.
JOURNAL
2022
Jul 31 Petty Cash 100
Cash 100
AP-20A LO 10-4
On January 1, 2022, Hit Design set up a petty cash fund for $250. At the end of the first week, the petty cash fund
contained the following items.
Cash on hand $50
Receipt for the purchase of office supplies 40
Receipt for delivery charges 10
Receipt for the purchase of stamps 20
Receipt for travel to a client meeting 50
Receipt for the payment of newspaper advertising 75
Required
a) Calculate any cash overage or shortage.

Since the total cash used this week is $195 (40 + 10 + 20 + 50 + 75), there should be $55
left in the petty cash fund (250 – 195). However, only $50 cash is actually in the petty cash
fund. Therefore, there is a shortage of $5.
583
b) Prepare the journal entries for setting up and replenishing the petty cash fund.
JOURNAL
2022
Jan 1 Petty Cash 250
Cash 250
Jan 7 Office Supplies 40

Delivery Expense 10
Stamps Expense 20
Travel Expense 50
Advertising Expense 75
Cash 200
AP-21A LO 10-4
Eric Dravin Enterprises decided to establish a petty cash fund for the office on January 11, 2022. Management set
up the fund and appointed the office administrator as the petty cash custodian. A cheque was issued for the petty
cash fund for $175, and was cashed. Management decided that the petty cash fund should be replenished when
the balance in the cash box reaches $75.
Required
a) Record the establishment of the petty cash fund on January 11.
JOURNAL
2022
Cash 175
b) On January 31, the balance in the petty cash account was $30. The totalled receipts showed the following
information.
Delivery Expense $89
Postage Expense 22
Office Supplies 13
Travel Expense 25
Total $149
Determine the balance of the petty cash fund based on the receipts provided.
$175 – 149 = $26
584
c) Prepare the journal entry to replenish the petty cash fund at the end of the month.
JOURNAL
2022
Jan 31 Delivery Expense 89
Postage Expense 22
Office Supplies 13
Travel Expense 25
Cash 145
e) On February 4, 2022, management determined that the petty cash fund’s balance ran too low for the month
of January. They suggested doubling the petty cash fund balance. A cheque for $175 was issued and cashed.
Record the transaction.
JOURNAL
2022
Feb 4 Petty Cash 175
Cash 175
AP-22A LO 10-4
The following information was taken from the records of the JoJo Store.
Apr 14 Paid $25 for public transit

Apr 16 Paid $20 for food
Apr 17 Purchased stamps for $5
Apr 17 Paid $50 for window washing
Apr 19 Paid $15 for the delivery of packages
Apr 20 Purchased office supplies for $30
JoJo is the owner of the store and he established a petty cash fund of $200 on April 12, 2022. All the transactions
listed above were paid using petty cash. Petty cash needs to be replenished when $50 is left in the petty cash box.
On April 21, there was $50 left in the petty cash box.
Prepare the journal entries for setting up and replenishing the petty cash fund.
585
JOURNAL
2022
Apr 12 Petty Cash 200
Cash 200
Apr 21 Travel Expense 25

Food Expense 20
Postage Expense 5
Delivery Expense 15
Office Supplies 30
Cash 150
AP-23A LO 10-4
Below are selected accounts from HB Consulting Services’ adjusted trial balance as at December 31, 2022.
Account Title Balance

Bank Loan $225,000
Bank of Montreal—Chequing Account 6,489
Royal Bank—Chequing Account 14,902
Cash Equivalents 100,000
Petty Cash 325
Royal Bank—Savings Account 10,500
On the December 31, 2022 balance sheet, what is the total amount of cash and cash equivalents that should be
reported?
Bank of Montreal—Chequing Account $6,489

Royal Bank—Chequing Account 14,902
Petty Cash 325
Royal Bank—Savings Account 10,500
Total Cash and Cash Equivalents $132,216
586
Application Questions Group B

AP-1B LO 10-1
It has been said that all businesses should a good system of internal controls.
Required
a) List 7 general objectives that a good system of internal controls is designed to fulfill.
1. Align the objectives of managers and employees with the objectives of the business owners
2. Safeguard assets against loss, misuse and theft
3. Prevent and detect fraud and error
4. Encourage good management practices
5. Reduce exposure to risk
6. Ensure compliance with financial reporting standards, including ASPE or IFRS
7. Ensure accuracy and validity of financial records
b) Discuss reasons why, even though a business has set a system of internal controls, such controls do not
provide a guarantee against errors, omissions or misuse of company resources.
There is a risk that errors may ocurr simply because of human involvement. Unintentional error may occur due
to overwork or fatigue, or other circumstances may be affecting the employee’s ability to perform their duties
properly.
Intentional errors may occur if it is the employee’s intent to committ an illegal or fraudulent act, which may be
difficult for any internal control system to prevent.
The size of a business may also dictate the level of internal controls present. For example a smaller company
may not be able to hire the number of employees necessary to ensure there is adequate separation of duties.
While a basic system of internal controls should exist no matter the size of business, smaller businesses may
have a limited amount of resources to allocate on controls.
AP-2B LO 10-2
Below is a list of internal controls considered effective in preventing/detecting errors for transactions involving
cash. Indicate whether each one is a control for cash receipts (CR), cash payments (CP) or both (Both). The first one
has been done for you as an example.
CR Invest idle cash into highly liquid investments.
CP Use EFT for cash payments.
CR Allow customers to deposit cheques directly into company bank account.
Both Provide each cashier with their own cash drawer with a predetermined amount of cash included at the
beginning of their shift.
CR Display sale amounts for customers to see while sale is being keyed into cash register.
CR Provide customer with a remittance copy of their statement that can be sent with payment to ensure it is
applied to the correct account.
CR Have cashier prepare a duplicate bank deposit slip, where one copy goes with the deposit to the bank and
is stamped as verified and then returned to the business for filing.
Both Use a cash over and short account to account for differences due to rounding.
CP Require that all cash payments are independently authorized.
Both Prepare a monthly bank reconciliation.
587
AP-3B LO 10-2
The Penny Shack operates a local store that sells a variety of items with nothing costing more than $5.00. Esther
Eaton, the bookkeeper, is unsure of how to record cash transactions when the total is rounded to the nearest
nickel. For example the following transactions were recorded the week of May 9–14, 2022.
Cash received Total sales

Monday $235.60 $235.62
Tuesday 125.95 125.97
Wednesday 343.20 343.22
Thursday 202.75 202.76
Friday 450.30 450.32
Saturday 685.10 685.08
Totals $2,042.90 $2,042.97
Esther has come to you for advice on how to record the above in one entry at the end of the week. Explain what
accounts are used and show how the journal entry is recorded.
In addition to debiting the cash account, Esther also needs to debit the cash over and short account to account
for the discrepancy in the total cash received and total sales.
JOURNAL
2022
May 14 Cash 2,042.90
Cash Over & Short 0.07
Sales 2,042.97
To record cash sales for the week
AP-4B LO 10-3
Mississippi Services prepared a bank reconciliation at March 31, which showed the following information.
Balance per bank statement $37,200

Add: Deposit in transit 10,300
Less: Outstanding cheques (12,600)
Correct cash balance per books, March 31 $34,900
According to the bank statement for the month of April, total deposits were $47,700 and total cheques cleared
were $49,700. All reconciling items at March 31 cleared the bank in April. Outstanding cheques at April 30 totalled
$5,000. There were no deposits in transit at April 30.
What is the correct cash balance per books at April 30?
Balance per bank statement at March 31 $37,200

Add: Deposits during April 47,700
Deduct: Cheques cleared during April (49,700)
Adjusted bank balance 35,200
Deduct: Outstanding cheques (5,000)
Correct cash balance per books at April 30 $30,200
588
AP-5B LO 10-3
The Steven Group prepared the following bank reconciliation for October 2022.
The Steven Group

Bank Reconciliation
October 31, 2022
Add outstanding deposit 6,470
Deduct outstanding cheques 1,471
The records for November show the following transactions. Assume all the outstanding deposits and cheques in
October are accounted for before the end of November.
Transaction Per Bank Per Books

Balance on November 30 $10,664 $16,006
November deposits 16,870 12,640
November cheques 15,660 16,890
November NSF cheque from a customer 5,803
Determine the amount of outstanding deposits and outstanding cheques at the end of November.
Calculation of outstanding deposits
Deposits per company books $12,640

Deposits per bank in November $16,870
Less: Outstanding deposits from October (6,470)
Deposits processed in November 10,400
Outstanding deposits at end of November $2,240
Calculation of outstanding cheques
Cheques written per books $16,890

Cheques cleared by bank in November $15,660
Less: Outstanding cheques from October (1,471)
Cheques processed in November 14,189
Outstanding cheques at end of November $2,701
AP-6B LO 10-3
The following financial information is related to a company called World’s Computer.

• Cash balance per general ledger is $2,219
• Bank statement balance is $2,478.80
• These cheques were recorded in the ledger but did not appear on the bank statement: Cheque #186 for $100;
Cheque #193 for $57; Cheque #199 for $143
• A deposit for $368 dated July 31 was recorded in the ledger but did not appear on the bank statement
• Service charges of $18 are shown on the bank statement
• A cheque for $37.50 has been cashed (correctly) by the bank but was incorrectly recorded in the company’s ledger as
$375.50. The cheque was issued for the purchase of office supplies.
• The bank automatically deposited interest of $7.80 at the end of the month
589
Required
a) Prepare the July 2022 bank reconciliation statement for World’s Computer.
World’s Computer
Bank Reconciliation
July 31, 2022
Cash balance per bank statement $2,478.80 Cash balance per books $2,219

Interest earned 7.80
Ledger error 338 345.80
Deduct outstanding cheques Deduct bank service charges 18

Cheque #186 100
Cheque #193 57
Cheque #199 143 300
Adjusted bank balance $2,546.80 Adjusted book balance $2,546.80
b) Record any journal entries required to bring the company records up to date.
JOURNAL
2022
Jul 31 Cash 338
Office Supplies 338
To correct error made in recording cheque
Jul 31 Cash 7.80

Interest Revenue 7.80
To record interest deposit from the bank
Jul 31 Bank Charges Expense 18

Cash 18
To record bank service charges
AP-7B LO 10-3
The bank statement for Fashion Fly had an ending cash balance of $1,500 on December 31, 2022. On this date the
cash balance in their general ledger was $2,000. After comparing the bank statement with the company records,
the following information was determined.
• The bank returned an NSF cheque in the amount of $320 that Fashion Fly deposited on December 20. The NSF
service fee was $5.
• A direct deposit was received from a customer on December 30 in payment of their accounts totalling $3,850. This
has not yet been recorded by the company.
• On December 30 the bank deposited $10 for interest earned.
• The bank withdrew $15 for bank service charges.
• Deposits in transit on December 31 totalled $4,020.
590
Required
a) Reconcile the ledger and bank statement.
Fashion Fly
Bank Reconciliation
December 31, 2022

EFT deposit 3,850
Interest earned 10 3,860
Deduct
NSF Cheque 320
b) Prepare the required journal entries.
JOURNAL
2022
Dec 31 Cash 3,850
To record collection of outstanding accounts receivable
Dec 31 Cash 10
Interest Revenue 10
Dec 31 Accounts Receivable 320

Cash 320
Dec 31 Bank Charges Expense 15

Cash 15

Cash 5
To record NSF fee
591
AP-8B LO 10-3
The bank statement for Flying Fashion had an ending cash balance of $1,640 on March 31, 2022. On this date the
cash balance in the general ledger was $1,921. After comparing the bank statement with the company records, the
following information was determined.
• The bank returned an NSF cheque in the amount of $264 that Flying Fashion deposited on March 20.
• A direct deposit was received from a customer on March 30 in payment of accounts totalling $3,900. This has
not yet been recorded by the company.
• The bank withdrew $41 for all bank service charges.
• On March 30 the bank deposited $14 for interest earned.
• Deposits in transit on March 31 totalled $3,890.
Required
a) Reconcile the ledger and bank statement.
Flying Fashion
Bank Reconciliation
March 31, 2022

EFT deposit 3,900
Deduct
NSF Cheque 264
b) Create the required journal entries.

JOURNAL
2022
Mar 31 Accounts Receivable 264
Cash 264
Mar 31 Cash 3,900

To record collection of outstanding accounts receivable
Mar 31 Cash 14
Interest Revenue 14
Mar 31 Bank Charges Expense 41

Cash 41
592
AP-9B LO 10-3
Shelley Company had completed October’s bank reconciliation with an exact reconciled balance on the last day of
the month. Consider the bank reconciliation for October.
Shelley Company
Bank Reconciliation
October 31, 2022
Description Ledger Bank
Opening Balance $6,500 $4,725.63
Add: Outstanding deposit 1 700
Error on Cheque #366 189
Outstanding deposit 2 950
Bank error Cheque #45928 1,000
Interest on bank account 23.63
Less: Outstanding Cheque #354 (300)
Outstanding Cheque #367 (2,265)
Direct Insurance billing (1,100)
EFT—Monthly rent (1,325)
NSF Cheque (875)
NSF charges (25)
Outstanding Cheque #368 (1,463)
Service charges (40)
Reconciled Balance $3,347.63 $3,347.63
The following items were discovered in November.

• An NSF cheque was entered by the bank for $570; it charged the bank account for $25.
• There are three deposits outstanding by the bank for $450, $200, and $1,465 respectively.
• Insurance is a preauthorized payment taken out every month for the same amount month.
• Shelley Company paid its monthly rent via an EFT.
• Cheques #354 and #367 are still outstanding.
• Cheque #378 is outstanding for $675.
• Cheque #379 is outstanding for $1,110.96.
• Interest earned on the bank account is $27.85.
• Total service charges for the bank account are $40.
• The balance of the ledger on November 30 is $6,284.95.
• The bank balance provided from the bank statement dated November 30 is $5,488.76.
593
Required
a) Complete the bank reconciliation for Shelley Company for the month of November.
Shelley Company
Bank Reconciliation
November 30, 2022
Cash balance per bank statement $5,488.76 Cash balance per books $6,284.95
Add Add interest on bank account 27.85

Outstanding deposit 3 1,465 2,115

Cheque #354 300 EFT—Insurance 1,100
Cheque #367 2,265 EFT—Rent 1,325
Cheque #379 1,110.96 4,350.96 NSF service charge 25
JOURNAL
2022
Nov 30 Cash 27.85
Interest Revenue 27.85
To record interest earned for the month of November
Nov 30 Insurance Expense 1,100

Cash 1,100
To record direct payment of insurance billed
Nov 30 Rent Expense 1,325

Cash 1,325
To record ETF for monthly rent
Nov 30 Accounts Receivable 570

Cash 570
Nov 30 Bank Charges Expense 25

Cash 25

Cash 40
To record bank service charges for the month
594
AP-10B LO 10-3
Tobias has been given the general ledger and bank statement for Eaton Company. Help him prepare the bank
reconciliation based on the two documents on September 30, 2022.
GENERAL LEDGER
Sep 1 Opening Balance 8,400 DR
Sep 7 Cheque #412 500 8,900 DR
Sep 9 Cheque #900—Equipment 4,800 4,100 DR
Sep 16 Cheque #901—Inventory 405 3,695 DR
Sep 19 Cheque #81 2,300 5,995 DR
Sep 27 Cheque #902—Office Supplies 180 5,815 DR
BANK STATEMENT
Sep 1 Opening Balance 8,400
Sep 7 EFT—Rent payment 1,300 7,100
Sep 9 Cheque #900 4,800 2,300
Sep 16 Cheque #901 450 1,850
Sep 19 Cheque #81 2,300 4,150
Sep 19 NSF—Cheque #81 2,300 1,850
Sep 19 NSF Charge 40 1,810
Sep 30 Interest 80 1,890
Note: In case of any discrepency between dollar amounts, assume the bank statement is correct.
Eaton Company
Bank Reconciliation
September 30, 2022
Add outstanding deposit 500 Add interest on bank account 80

Ledger error 45
NSF Cheque 2,300
NSF service charges 40 3,685
595
AP-11B LO 10-3
For the month of September 2022, Jared Anitco noticed that the bank processed a cheque that he was not aware
of. He called the bank and determined that the cheque belongs to another account. The following is the general
ledger report for cash in the bank and the bank statement for Jared Anitco for the month of September.
GENERAL LEDGER
Sep 1 Opening Balance 7,000 DR
Sep 6 CandyMan—Cheque #200 500 6,500 DR
Sep 6 Supply Store—Cheque #201 754 5,746 DR
Sep 10 Jordan Lo—Cheque #1000 800 6,546 DR
Sep 25 Book Store—Cheque #202 200 6,346 DR
BANK STATEMENT
Sep 1 Opening Balance 7,000
Sep 10 CandyMan—Cheque #200 500 6,500
Sep 10 Supply Store—Cheque #201 754 5,746
Sep 14 Jordan Lo—Cheque #1000 800 6,546
Sep 20 Mooris Mo—Cheque #1107 820 5,726
Sep 30 Book Store—Cheque #202 200 5,526
Identify the cheque that does not belong to Jared. Explain why a journal entry is not required to correct the mistake.
The bank has mistakenly processed Cheque #1107. No journal entry is required since an adjustment would only be
made by the bank.
AP-12B LO 10-3
The following cash ledger contains information about RJ Cosmetics’ cash account.
GENERAL LEDGER
Feb 1 Opening Balance 4,000 DR
Feb 3 Cheque #1 800 3,200 DR
Feb 12 Deposit 2,500 5,700 DR
Feb 21 Cheque #2 1,200 4,500 DR
Feb 26 Cheque #3 950 3,550 DR
Feb 27 Cheque #4 600 2,950 DR
596
RJ Cosmetics’ bank statement for the month of February is shown below.
BANK STATEMENT
Feb 01 Opening Balance 4,000
Feb 03 Cheque #1 800 3,200
Feb 12 Deposit 2,500 5,700
Feb 14 NSF Cheque 500 5,200
Feb 14 NSF Charge 15 5,185
Feb 21 Cheque #2 1,200 3,985
Feb 25 EFT—Monthly rent expense 1,000 2,985
Feb 28 Service charges 25 2,960
Feb 28 Interest on bank account 20 2,980
Required
a) Prepare a bank reconciliation for RJ Cosmetics as at February 28, 2022.
RJ Cosmetics
Bank Reconciliation
February 28, 2022
Add outstanding deposit 1,300 Add interest on bank account 20

Cheque #4 600 1,550 NSF service charge 15
EFT—Rent 1,000
b) Prepare the required journal entries for the corrections made in the bank reconciliation.
JOURNAL
2022
Feb 28 Cash 20
Interest Revenue 20
To record interest earned for the month of February
Feb 28 Accounts Receivable 500

Cash 500
597

Feb 28 Bank Charges Expense 15
Cash 15
Feb 28 Rent Expense 1,000

Cash 1,000
Feb 28 Bank Charges Expense 25

Cash 25
To record service charges for the month of February
c) Prepare the full reconciled cash ledger account for the month of February.
GENERAL LEDGER
Feb 1 Opening Balance 4,000 DR
Feb 3 Cheque #1 800 3,200 DR
Feb 21 Cheque #2 1,200 4,500 DR
Feb 26 Cheque #3 950 3,550 DR
Feb 27 Cheque #4 600 2,950 DR
Feb 28 NSF Cheque 500 3,750 DR
Feb 28 Charge for NSF Cheque 15 3,735 DR
Feb 28 Rent expense 1,000 2,735 DR
Feb 28 Service charges 25 2,710 DR
Feb 28 Interest 20 2,730 DR
d) Using last month’s data along with the bank statement and the general ledger provided, prepare a bank
reconciliation for RJ Cosmetics for March 31, 2022.
GENERAL LEDGER
Mar 1 Opening Balance 2,730 DR
Mar 7 Cheque #5 920 1,810 DR
Mar 13 Deposit 850 2,660 DR
Mar 18 Cheque #6 450 2,210 DR
Mar 28 Deposit 2,135 4,345 DR
Mar 29 Cheque #7 1,100 3,245 DR
598
BANK STATEMENT
Mar 1 Opening Balance 2,980
Mar 2 Deposit 1,300 4,280
Mar 3 Cheque #4 600 3,680
Mar 7 Cheque #5 920 2,760
Mar 13 Deposit 850 3,610
Mar 18 Cheque #6 450 3,160
Mar 25 EFT—Monthly rent expense 1,000 2,160
Mar 28 Deposit 2,135 4,295
Mar 31 Service charges 25 4,270
Mar 31 Interest on bank account 13.65 4,283.65
Please note that the deposit from March 28 contains a cheque from the customer who provided an NSF cheque
from the month before. The customer paid for the original amount of $500, plus the $15 charge.
RJ Cosmetics
Bank Reconciliation
March 31, 2022
Cash balance per bank statement $4,283.65 Cash balance per books $3,245
Add interest on bank account 13.65

Cheque #7 1,100 2,050 Bank service charges 25 1,025
AP-13B LO 10-3
Consider the following general ledger and bank statement for Saleen Salon.
GENERAL LEDGER
Dec 1 Opening Balance 8,100 DR
Dec 6 Jonny Supplies—Cheque #120 660 7,440 DR
Dec 10 WalkWalk Supplies—Cheque #121 1,180 6,260 DR
Dec 11 Bethany Balony 230 6,490 DR
Dec 14 Salon Beauty Inc.—Cheque #122 686 5,804 DR
Dec 19 Shona Care Ltd.—Cheque #123 930 4,874 DR
599
BANK STATEMENT
Dec 1 Opening Balance 8,100
Dec 6 Cheque #120 660 7,440
Dec 10 Cheque #121 1,180 6,260
Dec 10 EFT—Monthly rent 680 5,580
Dec 11 Bethany Balony 230 5,810
Dec 11 NSF Cheque 230 5,580
Dec 11 NSF charge 19 5,561
Dec 14 Cheque #122 866 4,695
Dec 21 Cheque #1470 3,700 995
Dec 31 Service charges 32 963
Dec 31 Interest on bank account 17 980
Additional Information
1. On December 14, Saleen Salon purchased $866 worth of salon supplies from Salon Beauty Inc.
2. The salon’s cheque numbers are always three digits in length.
Required
a) Prepare a bank reconciliation for Saleen Salon on December 31, 2022.
Saleen Salon
Bank Reconciliation
December 31, 2022
Add Add interest on bank account 17

Bank error 3,700
Outstanding deposit 2,200 5,900

Cheque #123 930 EFT—Rent 680
NSF Cheque 230
Ledger error 180
JOURNAL
2022
Dec 31 Rent Expense 680
Cash 680
Dec 31 Accounts Receivable 230

Cash 230
600

Cash 19
Dec 31 Salon Supplies 180

Cash 180
To correct error on Cheque #122
Dec 31 Cash 17
Interest Revenue 17
To record interest earned for the month of December

Cash 32
To record service charges for the month of December
AP-14B LO 10-3
The bookkeeper for Turner Textiles has prepared a bank reconciliation for the month but, although it balances, it
is not correct. Prepare a corrected bank reconciliation for Turner Textiles. Assume that all figures show the correct
dollar amounts, and that the opening balances are both correct.
Turner Textiles
Bank Reconciliation
July 31, 2022
Ledger Bank
Add:
Interest earned 100
Less:
Outstanding cheques (2,620)
Outstanding deposits (730)
Unrecorded deposit (1,570)
Turner Textile
Bank Reconciliation
July 31, 2022

EFT deposit 1,570
Deduct outstanding cheques 2,620 Deduct bank service charges 70
601
Analysis
Discuss why the items adjusted on the bank side do not require entries to be recorded in the general journal.
What items will need an adjusting entry in the general journal?
Items adjusted on the “bank” side will be handle by the bank; therefore, no adjustments are necessary in the
books. Adjustments to the book side will result in an adjusting entry. For example, the EFT deposit of $1,270 and
the $70 interest earned need to be added to the cash ledger account. The $50 for bank service charges also needs
to be recorded in the general journal. If these amounts are not added and subtracted from the ledger balance, the
balance will not be the same as that reported on the bank reconciliation, $23,160.
AP-15B LO 10-3
The owner of Lucy Learning has attempted to prepare the month-end bank reconciliation. However, she has
noticed that the ending balances do not match.
Required
a) Prepare a corrected bank reconciliation for Lucy Learning, assuming all figures show the correct dollar
amounts.
Lucy Learning
Bank Reconciliation
November 30, 2022
Description Ledger Bank
Opening Balance $3,400 $200
Add: Outstanding deposits 1,600
EFT—monthly payment for bank loan 1,500
Interest earned 250
Less: NSF Cheque (800)
NSF charge (40)
Bank service charge (60)
Direct customer deposit for balance owed (550)
Lucy Learning
Bank Reconciliation
November 30, 2022

EFT deposit 550
Interest earned 250 800
Deduct
NSF Cheque 800
EFT—Monthly payment for
bank loan 1,500 2,400
602
b) Record any journal entries necessary to update the cash account.
JOURNAL
2022
Nov 30 Cash 550
To record direct deposit to the bank
Nov 30 Cash 250

Interest Revenue 250
To record interest earned on bank balance
Nov 30 Accounts Receivable 800

Cash 800

Cash 40
To record NSF charge

Cash 60
To record monthly bank charge
Nov 30 Bank Loan 1,500

Cash 1,500
To record automatic withdrawal for bank payment
AP-16B LO 10-4
Gifts Galore established a petty cash fund at the beginning of May 2022. The weekday supervisor was named to be
the petty cash custodian, and they were given a cheque for $100 to set up the fund.
During June, the petty cash custodian made the following disbursements and placed a receipt for each in the cash
box provided. The related accounts impacted are also given.
Description Amount Related Account

Doughnut order for a staff meeting $13.29 Administration Expense
Freight charge to ship goods to a customer 15.00 Delivery Expense
Stamps for postage 26.00 Postage Expense
Printing costs for in-store promotional posters 31.60 Advertising Expense
The petty cash was replenished on May 28 when the amount of cash in the fund was $12.90. On September 1,
management decided to increase the fund to $200.
Prepare the journal entries to establish the petty cash fund, to reimburse it on May 28, and to increase the fund in
September.
603
JOURNAL
2022
May 1 Petty Cash 100.00
Cash 100.00
May 28 Administration Expense 13.29

Advertising Expense 31.60
Cash Over and Short* 1.21
Cash 87.10
To reimburse petty cash
Sep 1 Petty Cash 100.00

Cash 100.00
To increase the petty cash fund to $200
*Cash Over and Short calculation: $100.00 in petty cash − $85.89 in receipts = $14.11; $14.11 − $12.90
remaining in petty cash = $1.21
AP-17B LO 10-4
On April 1, 2022, Clayton Company established a petty cash fund of $200. During the month the custodian paid
out the following amounts.
Apr 6 Purchased stamps for $40

Apr 8 Paid a $20 delivery charge on an outgoing package
Apr 10 Paid $25 for public transit fares for employees on company business
Apr 14 Purchased coffee and doughnuts for $8 for clients during a meeting
Apr 15 Bought a package of paper for $7 for the copy machine
The custodian counted the fund on April 16 and found $105 in the petty cash box.
Required
a) Prepare the journal entry to record the establishment of the fund.
JOURNAL
2022
Cash 200
604
b) Prepare the journal entry to record the reimbursement of the fund on April 16, 2022.
JOURNAL
2022
Apr 16 Postage Expense 40
Delivery Expense 20
Travel Expense 25
Food Expense 8
Office Supplies 7
Cash 95
AP-18B LO 10-1, 2, 4
Last year, Holtzman Company established a petty cash fund of $100. The custodian complained that she had to
reimburse the fund on a weekly basis and suggested that the fund be increased to $400. That way, she would only
have to summarize payouts and get a cheque from the cashier once per month.
Management agreed with the custodian, and on April 1, 2022, advised the cashier to increase the fund to $400.
Required
a) Write the journal entry to increase the fund to $400.
JOURNAL
2022
Cash 300
Increase petty cash fund from $100 to $400
b) List five internal controls that should be established around the use of petty cash.
Answers will vary.
• name one person responsible for petty cash (custodian)
• keep petty cash in a safe place (e.g. petty cash box)
• establish guidelines concerning when payments may be made from petty cash
• have a modest amount for the petty cash fund
• maintain accurate records of amounts disbursed out of petty cash
• obtain a signed receipt for each payment made, showing the date of purchase, the name of the company or
vendor, a list of items or services purchased, the price of each item, and the total cost
• file all receipts correctly so they can be chequeed for any discrepancies
• set a particular date for which all petty cash reports for the month are due
• have a responsible person (e.g. manager) count the petty cash on a regular basis to ensure there are no
discrepancies
• designate a responsible person to authorize all reimbursements of petty cash
• use pre-numbered petty cash vouchers
• cancel all original documents when petty cash is reimbursed so that they cannot be presented a second time
605
• prepare a spreadsheet of expenses so that each month the general ledger can be updated with the correct
allocation of expense
AP-19B LO 10-1, 2, 4
On September 24, 2022, Charlie decided to set up a petty cash fund for his small business. Charlie transferred $150
to a cash box and informed his employees that they could use the money for small expenses for the business. He
told them to leave a short note with the reason for each withdrawal. Charlie decided to replenish the cash box
when its balance reached $30.
The following events took place.

Sep 24 Petty cash fund was established
Oct 10 The following notes and cash were found inside the cash box.
Notes
Travel $94
Postage 4
Miscellaneous 17
Office Supplies 9
Total Notes 124
Cash Remaining 15
Total $139
Nov 3 Charlie decided to increase the amount of the petty cash fund to $200
Record the transactions for the above three events.
JOURNAL
2022
Sep 24 Petty Cash 150
Cash 150
To set up a petty cash fund
Oct 10 Travel Expense 94

Postage Expense 4
Office Supplies 9
Cash 135
Nov 3 Petty Cash 50

Cash 50
606
Analysis
Charlie has noticed quite a few significant shortages in the cash box since the fund was established. What are two
controls that Charlie could implement around the use of petty cash to protect against shortages?
Charlie should appoint a petty cash custodian to be responsible for approving reimbursements from the cash
box. The custodian should require a formal receipt for each purchase to verify the amount and the reason for the
purchase.
AP-20B LO 10-4
On March 20, 2022, Michaelangelo’s decided to establish a petty cash fund for the restaurant. A cheque of $350
was issued and cashed. The $350 cash was given to the manager, April, who was to act as the petty cashier, and
the petty cash box could be locked in her office. At the suggestion of management, it was decided that the petty
cash fund should be replenished when the balance in the cash box reached $85.
Required
a) Record the establishment of the petty cash fund on March 20.
JOURNAL
2022
Mar 20 Petty Cash 350
Cash 350
b) On March 31, the balance in the petty cash account was $84. A summary of the expenses was prepared.
Advertising Expense $155

Delivery Expense 76
Postage Expense 23
Total $272
Determine the balance of the petty cash fund after all transactions have occurred for the month of April.
$350 – 272 = $78
c) Prepare the journal entry to replenish the petty cash fund.
JOURNAL
2022
Apr 30 Advertising Expense 155
Delivery Expense 76
Postage Expense 23
Cash 266
607
AP-21B LO 10-4
On March 20, 2022, Skyline Enterprises established a $300 petty cash fund.
Required
a) Prepare the entry to record the establishment of the fund.
b) At the end of the month, the petty cash custodian analyzed all the monthly transactions. She opened the petty cash box
and counted $100 cash remaining. There were also two receipts in the petty cash box: receipt #1: $100—Entertainment
and receipt #2: $98—Travel. Record the journal entries for this month’s expenses and replenish the fund.
c) At the end of the month, Skyline Enterprises wanted to increase the petty cash fund by $100. Prepare the journal entry
to record the increase in petty cash fund.
JOURNAL
2022
Cash 300
To establish petty cash fund
Mar 31 Entertainment Expense 100

Travel Expense 98
Cash 200
To record expenses related to petty cash fund

Cash 100
AP-22B LO 10-4
Sky Auctions set up a petty cash fund of $250 on January 1, 2022. The custodian found the following receipts in
the cash box for the month.
$35 for food for the office employees
$63 for fuel for the company vehicle
$50 to pay a specialist to update the computer system
$46 to purchase supplies for the office
The custodian counted $81 cash remaining in the cash box. Prepare journal entries to establish the petty cash fund
and replenish the petty cash fund on January 31, 2022.
JOURNAL
2022
Cash 250
To set up a petty cash fund
608

Jan 31 Food Expense 35
Fuel/Travel Expense 63
Office Supplies 46
Cash 169
Analysis
What is the purpose of a petty cash system?

Petty cash systems are used to make frequent, small payments more quick and convenient. It allows authorized
employees to pay small expenses without requiring lengthy approvals and cheques.
AP-23B LO 10-4
Below are selected accounts from Herrera Services’ adjusted trial balance as at December 31, 2022.
Account Title Balance

Bank Loan $125,000
Owner’s Withdrawals 15,000
Bank of Nova Scotia—Chequing Account 41,894
TD—Chequing Account 8,476
Car Loan Payable 25,965
Interest Expense 12,630
Interest Revenue 436
HST Refund Due 64,700
Petty Cash 105
TD—Savings Account 25,997
On the December 31, 2022 balance sheet, what is the total amount of cash and cash equivalents that should be
reported?
Bank of Nova Scotia—Chequing Account $41,894

TD—Chequing Account 8,476
Petty Cash 105
TD—Savings Account 25,997
Total Cash and Cash Equivalents $87,522
609
Case Study
CS-1 LO 10-1, 2
M & G Finances (M & G) is an incorporated tax preparation company. Most of its clients pay for the completion of
their tax returns with either a debit or a credit card. The rest pay with cash.
M & G employs 20 tax preparers, two supervisors and one manager. The office collects thousands of dollars in cash
every day. After a tax return is prepared by one of the 20 tax preparers, a supervisor is responsible for recording
information (i.e. customer name, amount charged, payment method) related to the return in a log.
The receipt of cash is recorded immediately when it is received. Receipts are issued immediately, in numerical
order. Copies of the receipts are also kept with the logs. The cash is kept in the drawer of the employee who
prepared the tax return. At the end of the day, the cash being kept by the various employees is pooled together
and then passed on to the supervisor, who keeps it in her drawer. The cash is deposited into the bank at the end
of each work week.
Over the past few weeks, the manager has noted that the amount of cash on hand in the office has consistently
been less than the amount recorded in the logs. In fact, the difference between the actual cash on hand and the
recorded amount is increasing little by little over time.
Required
a) Is M & G exhibiting any positive aspects in its system of cash controls? Explain.
The lone positive is that the cash is recorded immediately when it is received. Copies of the receipts are also
kept and they are kept in some kind of order. However, there is no mention of reconciling the total amount on
all of the receipts with the amounts written in the logs and the total amount of actual cash on hand.
b) What are the negatives in M & G’s cash control system? Explain. (You can refer to controls that do not exist, or
controls that exist but are ineffective.)
Protect cash when it is on the premises
• Undeposited cash is kept in different drawers. Cash should be kept in a safe or a vault that can be locked to
protect the cash.
• The undeposited cash is spread out and kept by the different tax preparers. Each tax preparer has easy access to
the cash, and it is difficult to manage since the cash is dispersed.
Remove cash from the premises as soon as possible
• Cash is deposited in the bank only at the end of each work week. For an office that receives thousands of dollars
in cash each day, it is ideal for the deposit to be made on a daily basis.
Others
• The manager has not dealt with the issue even though the discrepancy of the actual cash and recorded amount
has been increasing steadily over time. The manager is part of the control system, and this behaviour is negligent.
610

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Chapter 10

CASH AND INTERNAL CONTROLS

Access the integrated resource library for tutorials,

List three reasons for designing internal controls in a company.

Define cash equivalents.

The cash available in a bank account is negative.

Describe the position of cash equivalents on the balance sheet.

They are listed below cash in the current assets section.

It would invest to earn a higher return than a regular bank account.

What is a remittance advice on an invoice?

What is a voucher system for cash payments?

What is a bank reconciliation?

What are non-sufficient funds (NSF) cheques?

What is an outstanding deposit?

When is a journal entry required during a bank reconciliation?

How are outstanding cheques recorded on the bank reconciliation?

What is an imprest system for petty cash?

Prepare a bank reconciliation for the month of October.

Adjusted bank balance $21,565 Adjusted book balance $21,565

Prepare a bank reconciliation for the month of December.

Deduct outstanding cheques Deduct

Apr 30 Bank Charges Expense 10

Deduct outstanding cheques Deduct

Nov 30 Rent Expense 1,100

Office Supplies $60

Prepare the journal entry to replenish the petty cash fund.

Application Questions Group A

List all of the internal control weaknesses with Gordon’s business.

Note to instructor: Student answers may vary from solution.

regular employees is unavailable for their shift

access in the event a theft occurs

4. Should consider allowing customers to use debit/credit cards to increase revenue

5. Should pay bills with cheque/credit card where feasible

Day Cash received Total sales

What is the correct balance of cash at June 30, 2022?

Transaction Per Bank Per Books

Calculation of outstanding deposits

Calculation of outstanding cheques

Deduct outstanding cheques Deduct

Adjusted bank balance $8,914 Adjusted book balance $8,914

b) Write the necessary journal entries to correct Trimore’s records.

Jun 30 Cash 1,200

Jun 30 Cash 1,800

Date Account Title and Explanation Debit Credit

Jun 30 Bank Charges Expense 10

Add outstanding deposit 9,760 Add EFT deposit 3,500

Deduct outstanding cheques Deduct

Adjusted bank balance $62,016 Adjusted book balance $62,016

Date Account Title and Explanation Debit Credit

Jul 31 Accounts Receivable 70

Jul 31 Loan Payable 857

• The January 31 bank balance was $4,598.

a) Complete the bank reconciliation for Sellmore Company.

Deduct outstanding cheques Deduct

Adjusted bank balance $8,728 Adjusted book balance $8,728

b) Write the necessary journal entries to correct Sellmore’s records.

Jan 31 Bank Charges Expenses 33

Jan 31 Cash 1,620

Jan 31 Accounts Receivable 710

a) Complete the bank reconciliation for Jeremiah Motors.