Chapter 7: Q11RQ (page 411)
What are the controls needed to secure the petty cash fund?
There are three controls needed to secure the petty cash.
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How do businesses control cash receipts over the counter?
Accounting for petty cash transactions
Suppose that on June 1, Rockin’ Gyrations, a disc jockey service, creates a petty cash
fund with an imprest balance of \(300. During June, Michael Martell, fund custodian,
signs the following petty cash tickets:
Petty Cash
Ticket Number Item Amount
1 Postage for package received \) 30
2 Office party 25
3 Two boxes of stationery 20
4 Printer cartridges 15
5 Business dinner 65
On June 30, prior to replenishment, the fund contains these tickets plus cash of \(140.
The accounts affected by petty cash payments are Office Supplies, Entertainment
Expense, and Postage Expense.
Requirements
1. On June 30, how much cash should this petty cash fund hold before it is replenished?
2. Journalize all required entries to (a) create the fund and (b) replenish it. Includeexplanations.
3. Make the entry on July 1 to increase the fund balance to \)325. Include an explanation
Preparing a bank reconciliation and journal entries
This problem continues the Canyon Canoe Company situation from Chapter 6.
Canyon Canoe Company has decided to open a new checking account at River
Nations Bank during March 2019. Canyon Canoe Company’s March Cash T-account
for the new cash account from its general ledger is as follows:
Cash—River Nations Bank Checking Account
Balance
Deposit
Deposit
Deposit
Deposit
200
4,300
750
1,675
1,500
14,165
Mar. 1
2
13
20
27
Deposit
10,000
2,325
2,750
4,500
31 3,490
Mar. 2
4
9
14
21
Ck#101
Ck#102
Ck#103
Ck#104
Ck#105
175
300
28
30
Ck#106
Ck#107
Balance
Canyon Canoe Company’s bank statement dated March 31, 2019, follows:
Beginning Balance, March 1, 2019
Deposits and other credits:
Mar. 2
14
21
28
29 EFT Sport Shirts(1)
(1) Sport Shirts is a customer making a payment on account.
(2) Bank Checks is a company that prints business checks (considered
a bank expense) for Canyon Canoe Company
\(10,000
2,325
2,750
4,500
500
Checks and other debits:
Mar. 2 EFT to Bank Checks(2)
Ending balance, March 31, 2019
\) 0
31 Interest Revenue 45
3 Ck#101
6 Ck#102
15 Ck#104
16 Ck#103
55
200
4,300
1,675
750
28 EFT to Rivers Energy(3) 270
29 Ck#106 175
31 Bank service charge 70
20,120
(7,495)
$ 12,625
(3) Rivers Energy is a utility provider.
Requirements
1. Prepare the bank reconciliation at March 31, 2019.
2. Journalize any transactions required from the bank reconciliation.
3. Compute the adjusted account balance for the Cash T-account, and denote thebalance as End. Bal. Does the adjusted balance of the Cash T-account match theadjusted book balance on the bank reconciliation?
Match the accounting terminology to the definitions.
1. Sarbanes-Oxley Act
2. Internal control
3. Encryption
4. Separation of duties
5. Internal auditors
a. Organizational plan and all the related measures adopted by an entity to safeguard assets,
encourage employees to follow company policies, promote operational efficiency, and ensure
accurate and reliable accounting records.
b. Employees of the business who ensure that the company’s employees are following company
policies and meeting legal requirements and that operations are running efficiently.
c. Rearranging plain-text messages by a mathematical process—the primary method of
achieving security in e-commerce.
d. Requires companies to review internal control and take responsibility for the accuracy and
completeness of their financial reports.
e. Dividing responsibilities between two or more people.
What are two common methods used when accepting deposits for credit card and debit card transactions?
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