Accounting Practices 501 Chapter 7 Cash Controls and Bank Reconciliation Cathy Saenger, Senior Lecturer, Eastern Institute of Technology © Pearson 2011
Accounting Practices 501 Chapter 7 Cash Controls and Bank Reconciliation Cathy Saenger, Senior Lecturer, Eastern Institute of Technology © Pearson 2011.
Dec 30, 2015
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Accounting Practices 501
Chapter 7
Cash Controls and
Bank Reconciliation
Cathy Saenger, Senior Lecturer, Eastern Institute of Technology © Pearson 2011
Cash control proceduresCash control procedures• All cash and cheques received should be banked
intact.• Keep as little cash as possible.• All payments should be made by cheques except
small payments.• Keep a petty cash fund for small payments.• Bank reconciliation should be done.• Segregation of duties.• Rotation of duties.• Cash register.
Bank Reconciliation
Ch7A - Bank Recon 3
Each month a business will receive a bank statement from the bank
The balance of the Bank Statement will normally not be the same as the balance in the business’s Bank account in the General Ledger, due to various reasons:Unpresented cheques
Outstanding deposits
Automatic payments
Bank charges
Dishonoured cheques
Errors
A Bank Reconciliation then needs to be prepared
Bank Reconciliation
Ch7A - Bank Recon 4
Let’s look at an example
The following is a very simplified reconciliation as the slides have limited
space
Ch7A - Bank Recon 5
Cash Sales 100
Acc Receiv 300
Cash Sales 500
Cash Sales 700
Cash Sales 900
Teleph (#12) 200
Purch (#13) 400
Acc Pay (#14) 600
Cash Receipts Journal (June)
Cash Payments Journal (June)Ban
kBank
Bank reconciliation as at 31 May
Balance as per Bank statement $200Less Unpresented cheq #10 50
Balance as per Gen Ledger Bank acct
$150
We have the Cash Receipts Journal (CRJ), the Cash Payments Journal (CPJ) and the previous Bank Reconciliation of the business as well as the Bank Statement received from the bank
Opening bal $200
Deposit 100
Chq #10 50
Chq #12 200
Interest 150
Deposit 300
Chq #13 400
Deposit 500
Insurance 450
Dish cheq 120
Deposit 700
Bal $730 Cr
Bank Statement (30 June)Money in
Money out
Ch7A - Bank Recon 6
Cash Sales 100
Acc Receiv 300
Cash Sales 500
Cash Sales 700
Cash Sales 900
Teleph (#12) 200
Purch (#13) 400
Acc Pay (#14) 600
Cash Receipts Journal (June)
Cash Payments Journal (June)Ban
kBank
Bank reconciliation as at 31 May
Balance as per Bank statement $200Less Unpresented cheq #10 50
Balance as per Gen Ledger Bank acct
$150The Bank Statement has to be compared to the two cash
journals to find items that do not yet appear in the journals and to find items that do not yet appear in the Bank Statement.
We do that by ticking off the items from the Bank Statement.
Let’s start with comparing Money In to the Cash receipts journal
Opening bal $200
Deposit 100
Chq #10 50
Chq #12 200
Interest 150
Deposit 300
Chq #13 400
Deposit 500
Insurance 450
Dish cheq 120
Deposit 700
Bal $730 Cr
Bank Statement (30 June)Money in
Money out
Ch7A - Bank Recon 7
Cash Sales 100
Acc Receiv 300
Cash Sales 500
Cash Sales 700
Cash Sales 900
Teleph (#12) 200
Purch (#13) 400
Acc Pay (#14) 600
Cash Receipts Journal (June)
Cash Payments Journal (June)Ban
kBank
Bank reconciliation as at 31 May
Balance as per Bank statement $200Less Unpresented cheq #10 50
Balance as per Gen Ledger Bank acct
$150
Opening bal $200
Deposit 100
Chq #10 50
Chq #12 200
Interest 150
Deposit 300
Chq #13 400
Deposit 500
Insurance 450
Dish cheq 120
Deposit 700
Bal $730 Cr
Bank Statement (30 June)Money in
Money out
The $150 on the Bank Statement does not appear in the CRJAdd it to the Cash Receipts Journal
Interest
150
Ch7A - Bank Recon 8
Cash Sales 100
Acc Receiv 300
Cash Sales 500
Cash Sales 700
Cash Sales 900
Teleph (#12) 200
Purch (#13) 400
Acc Pay (#14) 600
Cash Receipts Journal (June)
Cash Payments Journal (June)Ban
kBank
Bank reconciliation as at 31 May
Balance as per Bank statement $200Less Unpresented cheq #10 50
Balance as per Gen Ledger Bank acct
$150
Opening bal $200
Deposit 100
Chq #10 50
Chq #12 200
Interest 150
Deposit 300
Chq #13 400
Deposit 500
Insurance 450
Dish cheq 120
Deposit 700
Bal $730 Cr
Bank Statement (30 June)Money in
Money out
Interest
150
Now we can tick off the Interest amount and the rest
^
^
Ch7A - Bank Recon 9
Cash Sales 100
Acc Receiv 300
Cash Sales 500
Cash Sales 700
Cash Sales 900
Teleph (#12) 200
Purch (#13) 400
Acc Pay (#14) 600
Cash Receipts Journal (June)
Cash Payments Journal (June)Ban
kBank
Bank reconciliation as at 31 May
Balance as per Bank statement $200Less Unpresented cheq #10 50
Balance as per Gen Ledger Bank acct
$150
Opening bal $200
Deposit 100
Chq #10 50
Chq #12 200
Interest 150
Deposit 300
Chq #13 400
Deposit 500
Insurance 450
Dish cheq 120
Deposit 700
Bal $730 Cr
Bank Statement (30 June)Money in
Money out
Interest
150
^
^
Now we can compare Money Out to the Cash payments journal
Ch7A - Bank Recon 10
Cash Sales 100
Acc Receiv 300
Cash Sales 500
Cash Sales 700
Cash Sales 900
Teleph (#12) 200
Purch (#13) 400
Acc Pay (#14) 600
Cash Receipts Journal (June)
Cash Payments Journal (June)Ban
kBank
Bank reconciliation as at 31 May
Balance as per Bank statement $200Less Unpresented cheq #10 50
Balance as per Gen Ledger Bank acct
$150
Opening bal $200
Deposit 100
Chq #10 50
Chq #12 200
Interest 150
Deposit 300
Chq #13 400
Deposit 500
Insurance 450
Dish cheq 120
Deposit 700
Bal $730 Cr
Bank Statement (30 June)Money in
Money out
Interest
150
^
^
The Insurance and dishonoured cheque need to be entered into the Cash Payments Journal
Insurance
450
Dish cheq
120
Ch7A - Bank Recon 11
Cash Sales 100
Acc Receiv 300
Cash Sales 500
Cash Sales 700
Cash Sales 900
Teleph (#12) 200
Purch (#13) 400
Acc Pay (#14) 600
Cash Receipts Journal (June)
Cash Payments Journal (June)Ban
kBank
Bank reconciliation as at 31 May
Balance as per Bank statement $200Less Unpresented cheq #10 50
Balance as per Gen Ledger Bank acct
$150
Opening bal $200
Deposit 100
Chq #10 50
Chq #12 200
Interest 150
Deposit 300
Chq #13 400
Deposit 500
Insurance 450
Dish cheq 120
Deposit 700
Bal $730 Cr
Bank Statement (30 June)Money in
Money out
Interest
150
^
^
Insurance
450
Dish cheq
120
Now we can tick the Insurance and Dishonoured cheque
^ ^
^ ^
To be continued ……
Ch7A - Bank Recon 12
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