6 Cash and Receivables ntermediate Accounting Accounting School. Zhongnan
6 Cash and Receivables Accounting School ·Zhongnan University of Economics & Law ntermediate Accounting I 中级会计学
Intermediate Accounting 6 Cash and Receivables 1. Accounting for cash Cash is the resources on hand to meet Planned expenditures pl and emergency situations
1. Accounting for cash Intermediate Accounting 6 Cash and Receivables Cash is the resources on hand to meet planned expenditures and emergency situations
Intermediate Accounting 6 Cash and Receivables Components of Cash vs, non-components Cash Included in cash Excluded from Cash · Coins and currency Certificates of deposit Checking accounts Bank overdrafts Savings accounts Postdated checks Negotiable checks Travel advances · Bank drafts · Postage stamps
Components of Cash vs. non-components Intermediate Accounting 6 Cash and Receivables Cash Included in Cash Excluded from Cash • Coins and currency • Checking accounts • Savings accounts • Negotiable checks • Bank drafts • Certificates of deposit • Bank overdrafts • Postdated checks • Travel advances • Postage stamps
Intermediate Accounting 6 Cash and Receivables Cash and Cash Equivalents Many companies report investments in very short-term, interest-earning securities as cash equivalents in the balance sheet
Cash and Cash Equivalents Many companies report investments in very short-term, interest-earning securities as cash equivalents in the balance sheet. Intermediate Accounting 6 Cash and Receivables
Intermediate Accounting 6 Cash and Receivables Cash Management Control Over receipts Immediately count the receipts(by the person opening the mail or the sales person using the cash register) Record daily all cash receipts in the accounting records Deposit daily all receipts in the companys bank account
Cash Management Intermediate Accounting 6 Cash and Receivables Control Over Receipts ➢ Immediately count the receipts (by the person opening the mail or the sales person using the cash register). ➢ Record daily all cash receipts in the accounting records. ➢ Deposit daily all receipts in the company’s bank account
Intermediate Accounting 6 Cash and Receivables Cash Management Control Over payments Make all payments by check(except petty cash items)so that a record exists for every company expenditure Authorize and sign all checks only after an expenditure is verified and approved Periodically reconcile the cash balance in the bank statements with the companys accounting records
Cash Management Intermediate Accounting 6 Cash and Receivables Control Over Payments ➢ Make all payments by check (except petty cash items) so that a record exists for every company expenditure. ➢ Authorize and sign all checks only after an expenditure is verified and approved. ➢ Periodically reconcile the cash balance in the bank statements with the company’s accounting records
Intermediate Accounting 6 Cash and Receivables Petty Cash a petty cash system is a cash fund created to allow a company to pay for small amounts that might be impractical or impossible to pay by check The entry to record the establishment of the fund is Petty Cash 500 ash 500 The petty cash account is neither debited nor credited again unless the fund size is to be increased or decreased
Petty Cash A petty cash system is a cash fund created to allow a company to pay for small amounts that might be impractical or impossible to pay by check. ➢ The entry to record the establishment of the fund is: Petty Cash 500 Cash 500 ➢ The petty cash account is neither debited nor credited again unless the fund size is to be increased or decreased. Intermediate Accounting 6 Cash and Receivables
Intermediate Accounting 6 Cash and Receivables Petty Cash As money is paid from the fund, prenumbered vouchers are prepared to document the expenditures but no journal entries are made until the fund is reimbursed At the time of reimbursement, appropriate expense accounts are debited and the cash account is credited as follows Office Supplies expense 120 Postage Expense 150 Cash 370
Petty Cash ➢ As money is paid from the fund, prenumbered vouchers are prepared to document the expenditures but no journal entries are made until the fund is reimbursed. ➢ At the time of reimbursement, appropriate expense accounts are debited and the cash account is credited as follows : Office Supplies Expense 120 Postage Expense 150 Cash 370 Intermediate Accounting 6 Cash and Receivables
Intermediate Accounting 6 Cash and Receivables 2. Bank reconciliation a company prepares a monthly bank reconciliation in order to analyze and reconcile the differences between the cash balance on the monthly bank statement and the company's accounting record of the proper cash balance
2. Bank Reconciliation A company prepares a monthly bank reconciliation in order to analyze and reconcile the differences between the cash balance on the monthly bank statement and the company's accounting record of the proper cash balance. Intermediate Accounting 6 Cash and Receivables
Intermediate Accounting 6 Cash and Receivables Common causes of differences Outstanding checks Deposits in transit Charges made by the bank Deposits made directly by the bank Errors
Common causes of differences Intermediate Accounting 6 Cash and Receivables ➢ Outstanding checks ➢ Deposits in transit ➢ Charges made by the bank ➢ Deposits made directly by the bank ➢ Errors