What is a bank reconciliation?
Bank reconciliation is a statement used to adjust the balance of the bank account and company’s books.
Bank reconciliation is a statement that shows the difference between a bank passbook and a company’s books.
A bank reconciliation statement is also called a summary that adjusts the balance of the bank account and the balance in the company’s books. Bank reconciliation statement includes deposit, withdrawal and other activities. The bank reconciliation statement is prepared when there is a difference between the bank account balance and the company’s books balance.
Accounting for petty cash transactions
On September 1, Party Salad Dressings creates a little cash fund with an imprest
balance of $600. During September, Michael Martell, the fund custodian, signs the
following petty cash tickets:
Ticket Number Item Amount
101 Office supplies $ 60
102 Cab fare for executive 25
103 Delivery of package across town 45
104 Business dinner 55
105 Merchandise inventory 75
On September 30, prior to replenishment, the fund contains these tickets plus cash
of $355. The accounts affected by petty cash payments are Office Supplies, Travel
Expense, Delivery Expense, Entertainment Expense, and Merchandise Inventory.
1. Explain the characteristics and the internal control features of an imprest fund.
2. On September 30, how much cash should the petty cash fund hold before it is replenished?
3. Journalize all required entries to create the fund and replenish it. Include explanations.
4. Make the October 1 entry to increase the fund balance to $800. Include an explanation and briefly describe what the custodian does.
Identifying internal controls. Consider each situation separately. Identify the missing internal control procedure from these characteristics:
• Assignment of responsibilities
• Separation of duties
• Electronic devices
• Other controls (specify)
a. While reviewing the records of Quality Pharmacy, you find that the same Team member orders merchandise and approves invoices for payment.
b. Business is slow at Amazing Amusement Park on Tuesday, Wednesday, and Thursday nights. To reduce expenses, the business decides not to use a ticket taker on those nights. The ticket seller (cashier) is told to keep the tickets as a record of the number sold.
c. The same trusted team member has served as a cashier for 12 years.
d. When business is brisk, Fast Mart deposits cash in the bank several times during the day. The manager at one store wants to reduce the time employees spend delivering cash to the bank, so he starts a new policy. Cash will build up over weekends, and the total will be deposited on Monday.
e. Grocery stores such as Convenience Market and Natural Foods purchase most merchandise from a few suppliers. At another grocery store, the manager decides to reduce paperwork. He eliminates the requirement that the receiving department prepare a receiving report listing the goods actually received from
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