Questions and Answers
An income statement account that is used to record cash overages and cash shortages arising from omitted petty cash receipts and from errors in making change is called the:
The entry necessary to establish a petty cash fund should include:
Assume that the custodian of a $450 petty cash fund has $62.50 in coins and currency plus $382.50 in receipts at the end of the month. The entry to replenish the petty cash fund will include:
Outstanding checks refer to checks that have been:
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A check that was outstanding on last period's bank reconciliation was not included with the canceled checks returned by the bank this period. As a result, in preparing this period's reconciliation, the amount of this check should be:
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In comparing the canceled checks on the bank statement with the entries in the accounting records, it is found that check number 4239 for November's rent was correctly written and drawn for $3,790 but was erroneously entered in the accounting records as $7,390. When reconciling the November bank statement, the company should:
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Triple Company's accountant made an entry that included the following items: debit postage expense $12.42, debit office supplies expense $27.33, credit cash over/short $2.19. If the original amount in petty cash is $320, how much is in petty cash before the reimbursement?
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What is the amount of cash over and short based on the following: Petty cash balance, $450.00; Courier receipt, $82.50; Postage receipt, $48.00; Office Supplies receipt, $56.22; Business meal receipt, $102.34; Cash on hand at the end of the month, $76.21?
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What is the adjusted bank balance for Fluffy Pet Grooming given the following: Cash account shows a $14,811 debit balance; bank statement shows $14,472; outstanding checks total $2,261; $75 debit memorandum included for bank services; check for $789 recorded incorrectly as $798; cash receipts of $2,534 not recorded?
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How do you reconcile Sleepy Time Bedding's book balance of cash with its bank statement cash balance as of July 31?
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Study Notes
Cash Management Concepts
- Cash Over and Short Account: Records cash overages and shortages due to omitted receipts or change errors.
- Establishing a Petty Cash Fund: Involves debiting Petty Cash and crediting Cash.
- Replenishing Petty Cash Fund: If funds include $62.50 in coins and currency plus $382.50 in receipts for a $450 petty cash fund, a credit to Cash is needed for $387.50.
Outstanding Checks
- Definition: Outstanding checks are written, recorded, sent to payees, but not yet paid by the bank.
- Reconciliation Impact: Outstanding checks that were not returned must be deducted from the bank balance during reconciliation.
Errors and Adjustments
- Check Entry Error: An incorrectly recorded check (e.g., entered as $7,390 instead of $3,790) requires an adjustment by adding the difference to the book balance during bank reconciliation.
Petty Cash Transactions
- Initial Amount: A $320 petty cash fund can show a balance of $282.44 after accounting for expenses and cash on hand.
- Cash Over and Short Calculation: Given petty cash activities, a cash over and short balance of debit $84.73 indicates discrepancies between expected and actual cash.
Bank Reconciliation Scenarios
- Fluffy Pet Grooming: A bank reconciliation reveals an adjusted bank balance of $14,745 after accounting for outstanding checks, bank service fees, and unrecorded cash receipts.
- Sleepy Time Bedding: A need to reconcile a cash account balance of $25,862 with a bank statement balance of $28,177, considering outstanding checks and previous reconciliations.
General Accounting Principles
- Debits and Credits: Understanding the use of debits to record expenses and credits for cash changes is essential for maintaining accurate financial records.
- Petty Cash Management: Effective tracking of petty cash ensures that discrepancies are minimized and any shortages or overages are promptly recorded and reconciled.
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Test your knowledge of basic accounting concepts with these flashcards. Focus on terms related to income statements and petty cash management. Perfect for beginners and those looking to refresh their accounting skills.
