Chapter 7: Q8RQ (page 411)
How do businesses control cash receipts over the counter?
Cash receipts are controlled with the help of a point-of-sale terminal.
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What is a bank reconciliation?
Preparing a bank reconciliation
Jim Root Corporation operates four bowling alleys. The business just received the
On October 31, 2018, bank statement from City National Bank, and the statement shows
an ending balance of \(910. Listed on the statement are an EFT rent collection of
\)440, a service charge of \(7, NSF checks totaling \)50, and a \(23 charge for printed
checks. In reviewing the cash records, the business identified outstanding checks totaling
\)440 and a deposit in transit of \(1,800. During October, the business recorded a
\)260 check by debiting Salaries Expense and crediting Cash for \(26. The business’s
Cash account shows an October 31 balance of \)2,144.
Requirements
1. Prepare the bank reconciliation at October 31.
2. Journalize any transactions required from the bank reconciliation.
Preparing a bank reconciliation and journal entries
The August 31 bank statement of Well Healthcare has just arrived from United Bank.
To prepare the bank reconciliation, you gather the following data:
a. The August 31 bank balance is \(4,540.
b. The bank statement includes two charges for NSF checks from customers. One is
for \)380 (#1), and the other is for \(180 (#2).
c. The following Well Healthcare checks are outstanding at August 31:
Check No. Amount
237 \) 80
288 190
291 570
294 600
295 30
296 70
d. Well collects from a few customers by EFT. The August bank statement lists a
\(1,200 EFT deposit for a collection on account.
e. The bank statement includes two special deposits that Well hasn’t recorded yet:
\)800 for dividend revenue, and \(120 for the interest revenue Well earned on its
bank balance during August.
f. The bank statement lists a \)50 subtraction for the bank service charge.
g. On August 31, the Well treasurer deposited \(260, but this deposit does not appear
on the bank statement.
h. The bank statement includes a \)1,050 deduction for a check drawn by Multi-State
Freight Company. Well notified the bank of this bank error.
i. Well’s Cash account shows a balance of $2,800 on August 31.
Requirements
1. Prepare the bank reconciliation for Well Healthcare at August 31, 2018.
2. Journalize any required entries from the bank reconciliation. Include anexplanation for each entry.
Question: What is the difference between an internal auditor and an external auditor?
Applying internal control over cash receipts by mail. Review the internal controls over cash receipts by mail presented in the chapter. Exactly what is accomplished by the final step in the process, performed by the controller?
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