Accounting Fundamentals > Chapter 9 > Flashcards

Chapter 9 Flashcards

Cash (58 cards)

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1
Q

cash

A

currency, coins, checks, money orders, and funds on deposit in a bank
-mostly involve checks

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2
Q

cash equivalents

A

assets that are easily convertible into known amounts of cash
-recognize short-term, liquid investments with very low risk
CDs (bank account w/ fixed maturity and interest rate)
Treasury Bills w/ maturities of 3 months or less (debt obligation issued by the US government)

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3
Q

change fund

A

the cash in the cash drawer to give as change to customers
-store manager and cash register clerk should both count the cash at each shift

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4
Q

cash proof

A

verifies the amount in the cash register less the change fund equals the amount shown on the cash register transaction totals
-cash receipts > sales per the cash register tape (Over)
-cash receipts < sales per the cash registers take (short)

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5
Q

Cash Short or Over Account

A

Credit Balance = overage (treated as revenue)
Debit Balance = shortage (treated as expense)

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6
Q

Short

A

Cash Debit
Cash Short or Over Debit
Sales Credit

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7
Q

Over

A

Cash Debit
Cash short or over Credit
Sales Credit

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8
Q

Short Over Calculation

A

Cash Count - Sales of register tape - cash fund = short or over

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9
Q

statement of account

A

a form sent to a firms customers showing transactions during the month and the balance owed

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10
Q

Cash Refund

A

$75 cash refund for supplies
Cash Debit
Supplies Credit

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11
Q

Promissory Note

A

written promise to pay a specified amount of money on a specific date
-most require that interest is paid
-used to extend credit for some sales transactions
-sometimes used to replace an accounts receivable balance when the account it overdue
-journal entry:
Notes Receivable DEBIT
AR CREDIT

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12
Q

Receiving payment for promissory note

A

Cash Debit
Interest Income Credit
Notes Receivable Credit

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13
Q

Internal Controls for Cash

A

Require payments be made by check
One employee approves payments, one prepares the checks, one records the transaction

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14
Q

Petty Cash

A

small amount of cash on hand to pay small business expenditures
-managed by only one person, usually the office manager/cashier/assistant
-ASSET account

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15
Q

Recording Petty Cash establishment

A

Petty Cash Debit
Cash Credit

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16
Q

Petty cash voucher

A

a form used to record the payments made from a petty cash fund

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17
Q

Petty Cash Analysis Sheet

A

a form used to record transactions involving petty cash
Receipts - cash put in the fund
payments - cash paid out

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18
Q

Replenishing the Fund

A

total vouchers plus the cash on hand should always equal the amount of the fund
-replenish the petty cash fund at the end of each month or sooner if the fund is low
-Debit all expenses/drawing
-Credit cash

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19
Q

Internal Control of Petty Cash

A

-only use when check cant be used
-limit the amount
-write petty cash check to person in charge of the fund
-assign one person to control
-obtain voucher for each payment

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20
Q

Internal Control of Cash Receipts

A
  • one designated employee and bonding (employees are investigated by an insurance company that will insure the business against losses through theft of fund mishandling)
    -keep locked/safe
    -record of all cash receipts
    -check the funds to be desposited against, seperate employee
    -deposit to bank promptly, seperate employee
    -enter transactions into accounting records, seperate employee
    -monthly bank reconcilition, seperate employee
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21
Q

Internal Control of Cash Payments

A

-make payments with check
-issue checks only with an approved bill/invoice/document
-designated personnel to approve bills/invoices
-separate person prepares checks and record in checkbook
-separate person sign and mail checks
-use prenumbered check forms to account for
-enter into accounting records

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22
Q

check

A

written order signed by an authorized person instructing a bank to pay a sum of money to a designated person/business

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23
Q

drawer

A

the person or firm issuing the check

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24
Q

drawee

Study These Flashcards
A

the bank on which a check is written

25
negotiable
financial instrument whose ownership can be transferred to another person/business
26
Writing a check
1. complete the check stub with balance brought forward, amount, balance, date, payee, purpose 2. fill in the check 3. sign check
27
Debit Cards
aka check cards operates like cash or personal check
28
Endorsing checks
a written authorization that transfers ownership of a check -the back part of the check that needs to be signed
29
blank endorsement
a signature of the payee written on the back of the check that transfers ownership of the check without specifying to whom or for what purpose
30
full endorsement
a signature transferring a check to a specific person, firm, or bank
31
restrictive endorsement
a signature that transfers a check to a specific party for a stated purpose
32
Deposit slip
a form prepared to record the deposit of cash or checks to a bank account
33
Magnetic ink character recognition (MICR)
the numbers printed on the bottom of deposit slip/checks
34
Numbers at bottom of deposit slip 1210-8640-38-1498867
12: indicates the bank is in the 12th federal reserve district 10: the routing number 8640: identifies the bank 38 1498867: business account number
35
ABA transit number
the number on the top part of the fraction that appears in the upper right corner of the check
36
Post dated check
a check dated some time in the future -written if not enough funds to cover at the time -not a common business practice
37
canceled checks
a check paid by the bank on which it was drawn
38
credit memorandum
a form that explains any addition, other than a deposit, to a checking account
39
debit memorandum
a form that explains any deduction, other than a check or other electronic payment transaction, from a checking account
40
service charge
a fee charged by a bank to cover the costs of maintaining accounts and providing services
41
dishonored (NSF) check
a check returned to the depositor unpaid because of insufficient funds in the drawer's account; also called an NSF check -happens when there are insufficient funds to cover the check -AR Debit Cash Credit
42
Adjustment Book Balance Calculation
Book Balance - NSF Check - Bank service Charge Not affect: deposit in transit/outstanding checks
43
Why book balance of cash may not agree with bank statement
1. outstanding checks (checks that are recorded but not been paid by bank) 2. deposit in transit (deposit that is recorded but reaches to the bank too late to be shown on statement) 3. service charges are not recorded 4. deposits such as promissory notes are not recored
44
bank reconciliation statement
a statement that accounts for all differences between the balance on the bank statement and the book balance of cash - First Section: Bank Statement balance + Deposits in transit - Outstanding checks +/- bank errors = Adjusted Bank Balance - Second Section: Book Balance + Deposits not recorded - Deductions not recorded +/- errors in the books = Adjusted Book Balance
45
First Section
1. Enter Balance on the bank statement 2. Compare deposits in checkbook with the deposit on the statement 3. List the outstanding checks 4. Find bank errors and report (error amount is added to bank statement balance on the bank reconciliation statement) 5. The adjusted bank balance
46
Second Section
1. Enter balance in books 2. Record any deposits not recorded 3. Record deductions not recorded 4. Record any errors discovered 5. Adjusted Book Balance
47
Returned Check not recorded
AR Debit Cash Credit
48
Bank Service Charge not recorded
Bank Fee Expense Debit Cash Credit
49
Record Books Error on Check issued
Expense Debit Cash Credit
50
Internal Control of Banking Activities
1. Limit access to the checkbook, keep it locked 2. Use pre-numbered check forms. Verify and account for all checks 3. Separate duties: - person to write check should not sign or mail check - person who performs bank reconciliation should not handle or deposit cash receipts, record, sign, or mail checks 4. File all deposit receipts, canceled checks, voided checks, and bank statements for reference 5. Limit use of bank ATM cards and change passwords frequently 6. Require employees working with cash receipts/payments to take mandatory annual vacations
51
Electronic Funds Transfers (EFT)
an electronic transfer of money from one account to another
52
Loan received not recorded
Cash Debit Notes Payable Credit
53
Record Loan Payment
Notes Payable Debit Cash Credit
54
EFT Payment
Cash Debit AR Credit
55
Bill Payment
Expense Debit Cash Credit
56
ATM withdrawl by owner
Drawing Debit Cash Credit
57
Bank Balance (No Entry Needed)
-Deposit in Transit -Outstanding Check -Check issued by another firm that was charged to account by mistake
58
Book Balance (Entry Needed)
-Debit Memorandum -Credit Memorandum -Error in Records -Bank Service Charge
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