Nakashima Gallery had the following petty cash transactions in February of the current year.
Feb. 2 Wrote a $400 check, cashed it, and gave the proceeds and the petty cashbox to Chloe Addison, the petty cashier.
5 Purchased paper for the copier for $14.15 that is immediately used.
9 Paid $32.50 COD shipping charges on merchandise purchased for resale, terms FOB shipping point. Nakashima uses the perpetual system to account for merchandise inventory.
12 Paid $7.95 postage to deliver a contract to a client.
14 Reimbursed Adina Sharon, the manager, $68 for mileage on her car.
20 Purchased stationery for $67.77 that is immediately used.
23 Paid a courier $20 to deliver merchandise sold to a customer, terms FOB destination.
25 Paid $13.10 COD shipping charges on merchandise purchased for resale, terms FOB shipping point.
27 Paid $54 for postage expenses.
28 The fund had $120.42 remaining in the petty cashbox. Sorted the petty cash receipts by accounts affected and exchanged them for a check to reimburse the fund for expenditures.
28 The petty cash fund amount is increased by $100 to a total of $500.
1. Prepare the journal entry to establish the petty cash fund.
The Petty cash account is debited with $400.
Petty cash- Petty cash is a nominal sum protected close by to cover minor costs, such as repayments or other office-related costs. Like different funds, petty cash will likewise depend on regular reconciliations, with each transaction being kept in the official statements and other records.
To record establishment of the petty cash fund
The following information is available to reconcile Severino Co.’s book balance of cash with its bank statement cash balance as of December 31, 2017.
a. The December 31 cash balance according to the accounting records is $32,878.30, and the bank statement cash balance for that date is $46,822.40.
b. Check No. 1273 for $4,589.30 and Check No. 1282 for $400, both written and entered in the accounting records in December, are not among the canceled checks. Two checks, No. 1231 for $2,289 and
No. 1242 for $410.40, were outstanding on the most recent November 30 reconciliation. Check No. 1231 is listed with the December canceled checks, but Check No. 1242 is not.
c. When the December checks are compared with entries in the accounting records, it is found that Check No. 1267 had been correctly drawn for $3,456 to pay for office supplies but was erroneously entered in the accounting records as $3,465.
d. Two memoranda are enclosed with the statement and are unrecorded at the time of the reconciliation. The first is for a $762.50 charge that dealt with an NSF check for $745 received from a customer, Titus Industries, in payment of its account. The bank assessed a $17.50 fee for processing it. The second is $99 in miscellaneous expenses for check printing.
e. The bank statement shows that the bank collected $19,000 cash on a note receivable for the company, deducted a $20 collection expense, and credited the balance to the company’s Cash account. Severino did not record this transaction before receiving the statement.
f. Severino’s December 31 daily cash receipts of $9,583.10 were placed in the bank’s night depository on that date but do not appear on the December 31 bank statement.
3. Explain the nature of the communications conveyed by a bank when the bank sends the depositor (a) a debit memorandum and (b) a credit memorandum.
A good system of internal control for cash provides adequate procedures for protecting both cash receipts and cash disbursements. Identify each of the following statements as either true or false regarding this protection.
c. A basic guideline for safeguarding cash is to separate the duties of those who have custody of cash from those who keep cash records.
An internal control system consists of all policies and procedures used to protect assets, ensure reliable accounting, promote efficient operations, and urge adherence to company policies. Evaluate each of the following statements and indicate which are true and which are false regarding the objectives of an internal control system.
4. Separating the responsibility for a transaction between two or more individuals or departments will not help prevent someone from creating a fictitious invoice and paying the money to herself or himself.
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