Chapter 6: Q3DQ (page 304)
Why should responsibility for related transactions be divided among different departments or individuals?
Answer
The responsibility associated with related transactions ought to be divided so crafted by one office or individual goes about as a mind that of another.
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Answer each of the following related to international accounting standards.
a. Explain how the purposes and principles of internal controls are different between accounting systems reporting under IFRS versus U.S. GAAP.
Moya Co. establishes a petty cash fund for payments of small amounts. The following transactions involving the petty cash fund occurred in January (the last month of the company’s fiscal year).Jan. 3 A company check for \(150 is written and made payable to the petty cashier to establish the petty cash fund.14 A company check is written to replenish the fund for the following expenditures made since January 3.
a. Purchased office supplies for \)14.29 that are immediately used up.
b. Paid \(19.60 COD shipping charges on merchandise purchased for resale, terms FOB shipping point. Moya uses the perpetual system to account for inventory.
c. Paid \)38.57 to All-Tech for repairs expense to a computer.
d. Paid \(12.82 for items classified as miscellaneous expenses.
e. Counted \)62.28 remaining in the petty cashbox.
15 Prepared a company check for \(50 to increase the fund to \)200.
31 The petty cashier reports that \(17.35 remains in the fund. A company check is written to replenish the fund for the following expenditures made since January 14.
f. Paid \)50 to The Smart Shopper in advertising expense for January’s newsletter.
g. Paid \(48.19 for postage expenses.
h. Paid \)78 to Smooth Delivery for delivery expense of merchandise, terms FOB destination.
31 The company decides that the January 15 increase in the fund was too little. It increases the fund by another \(50, leaving a total of \)250.
Required
1. Prepare journal entries (in dollars and cents) to establish the fund on January 3, to replenish it on January 14 and January 31, and to reflect any increase or decrease in the fund balance on January 15 and 31.
Analysis Component
2. Explain how the company’s financial statements are affected if the petty cash fund is not replenished and no entry is made on January 31
Waupaca Company establishes a \(350 petty cash fund on September 9. On September 30, the fund shows \)104 in cash along with receipts for the following expenditures: transportation-in, \(40; postage expenses, \)123; and miscellaneous expenses, \(80. The petty cashier could not account for a \)3 shortage in the fund.
The company uses the perpetual system in accounting for merchandise inventory. Prepare (1) the September 9 entry to establish the fund. (2) the September 30 entry to reimburse the fund.(3) an October 1 entry to increase the fund to $400.
For each of the following items a through g, indicate whether its amount (1) affects the bank or book side of a bank reconciliation, (2) represents an addition or a subtraction in a bank reconciliation, and (3) requires an adjusting journal entry.
Bank or Book Side Add or Subtract Adj. Entry or Not
d. Outstanding checks. . . . . . . . . . . . . . .
2. Identify the two events from the following that cause a Petty Cash account to be credited in a journal entry.
a. Fund amount is being reduced. c. Fund is being eliminated.
b. Fund amount is being increased. d. Fund is being established
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