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UNIT 4 i

Internal control for cash and correction of errors

Unit 4

BBM 205/05
Business Accounting I

Internal Control for


Cash and Correction
of Errors
ii WAWASAN OPEN UNIVERSITY
BBM 205/05 Business Accounting I

COURSE TEAM
Course Team Coordinator: Mr. Lim Peng Keat
Content Writers: Mr. Gabriel Gim Chien Wei and Ms. Ng Keat Hui
Instructional Designer: Ms. Ch’ng Lay Kee
Academic Members: Dr. Loo Choo Hong and Ms. Deehbanjli Lakshmayya

COURSE COORDINATOR
Mr. Lim Peng Keat

EXTERNAL COURSE ASSESSOR


Professor Dr. Ravindran Ramasamy, Universiti Tun Abdul Razak, Malaysia

PRODUCTION
In-house Editor: Ms. Ch’ng Lay Kee
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UNIT 4 iii
Internal control for cash and correction of errors

Contents
Unit 4 Internal Control for Cash and
Correction of Errors
Unit overview 1

Unit objectives 1

4.1 Internal control for cash 3

Objectives 3

Introduction 3

Internal control principles and procedures 3

Suggested answers to activity 5

4.2 Preparing petty cash accounts 7

Objectives 7

Introduction 7

Petty cash 7

The imprest system 7

The petty cash book 8

Suggested answers to activities 12

4.3 Performing bank reconciliation 15

Objectives 15

Introduction 15

Timing differences 15

Omission in recording 16

Updating the cash book 18


iv WAWASAN OPEN UNIVERSITY
BBM 205/05 Business Accounting I

Errors in recording 19

Suggested answers to activities 24

4.4 Suspense accounts and correction of errors 27

Objectives 27

Introduction 27

Suspense account and the correction journals 27

Errors revealed by the trial balance 28

Errors not revealed by the trial balance 33

Suggested answers to activities 38

Summary of Unit 4 41

Unit practice exercise 43

Suggested answers to self-tests 45

Suggested answers to unit practice exercise 47

Reference 51
UNIT 4 1
Internal control for cash and correction of errors

Unit Overview

C ash and its equivalent is an important asset of a business. Management of cash


and its equivalent is a very important area in any organisation. Emphasis is always
placed on how to improve the handling of cash and its equivalent like optimise
the benefit from efficient cash management, minimise the fraud and negligence in
cash handling and safeguard the company’s asset effectively. Thus, proper internal
control procedures have to be in place to ensure the above objectives are achieved.

In this unit, we shall learn on how to control the petty cash of a company, how to
minimise the risk of fraud in cash handling with the imprest system and how to
enhance the accuracy of recording.

We shall also learn how to compare the bank account and bank statement, find out
the cause for the discrepancies, make the necessary updates in the cash book and
prepare a bank reconciliation statement at a fixed interval.

Lastly, we shall learn how to rectify the errors in recording the transactions, eliminate
the suspense account and prepare the adjusted trial balance.

Unit Objectives
By the end of this unit, you should be able to:

1. Identify the importance of internal control.

2. Set up a petty cash account and describe how the imprest system works.

3. Perform the bank reconciliation and prepare a bank reconciliation statement.

4. Solve the discrepancies in trial balance and make corrective entries to rectify
errors.
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UNIT 4 3
Internal control for cash and correction of errors

4.1 Internal Control for Cash


Objectives
By the end of this section, you should be able to:

1. Describe the nature and purpose of internal control.

2. Explain and apply various internal control techniques to safeguard the cash
as an important asset to an organisation.

Introduction
As the business grows, a proper procedure is needed to control and safeguard the
company’s asset. Cash as one of the most important asset of the company, requires
an effective control procedure to monitor and handle to minimise the risk of loss
and unauthorised use.

Internal control principles and procedures


The internal control procedures will help to:

1. Prevent and detect errors and irregularities in handling of cash.

2. Safeguard the cash from theft and unauthorised use.

3. Enhance the accuracy of recording.

The basic principles involved in the internal control for cash is:

1. Establishment of The staff is assigned by a clearly defined areas of


responsibilities responsibilities to effectively carry out his duties.
2. Segregation of Related duties like physical custody and record keeping are
duties assigned to different staff.
3. Documentation A pre-numbered document system should be in place to
procedures account for completeness of records.
4. Independent The work of the staff handling cash will be checked by
checking independent personnel regularly.
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The commonly used internal procedures for cash control are as follows:

1. Cash Receipts

a. Cash receipts should be recorded on a log immediately.

b. Issus pre-numbered receipts to every customer.

c. At the end of the day, the total receipts will be checked by an independent
person.

d. The independent person will also ensure that all receipts are bank-in.

2. Cash Disbursements

a. Establish a pre-numbered voucher system.

b. All payments must be supported by valid documents.

c. All payments must be checked by an independent supervisor.

d. Only the authorised personnel can approve the payments.

Activity 4.1

1. Explain why there is a need to have internal control procedure


over the cash management.

2. Name two internal control procedures for cash receipt and cash
disbursement each and briefly explain how it helps to enhance
the control on the cash management.

Summary

Internal control is important in cash handling. An effective


internal control system must be in place to ensure that there is no
mismanagement of cash.
UNIT 4 5
Internal control for cash and correction of errors

Suggested answers to activity

Feedback

Activity 4.1

1. The establishment of internal control procedure is to safeguard


the assets of a company. Cash as one of the most important
liquid asset of a company requires a proper system to minimise
the risk of loss and unauthorised use.

2. Two commonly used internal control procedures for cash receipt


are:

a. Issue pre-numbered receipt to every customer. This is to


ensure completeness of record for receipts.

b. Total receipts are checked by an independent staff. This is


to ensure all receipts are accounted for.

Two commonly used internal control procedures for cash


disbursement are:

a. All payments must be supported by valid documents. This is


to ensure that payments are made for goods or services
received in order only.

b. All payments must be approved by authorised personnel


only. This is to minimise fraud and mismanagement of cash.
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UNIT 4 7
Internal control for cash and correction of errors

4.2 Preparing Petty Cash Accounts


Objectives
By the end of this section, you should be able to:

1. Identify the purpose of a petty cash book.

2. Explain the imprest system.

3. Prepare a petty cash account.

Introduction
Petty cash refers to the fund that a business keeps in the office to make payment
for minor expenses. Normally petty cash payments are supported by a bill or a
receipt. The person in-charge of petty cash will have to present all the receipts for
reimbursement.

Petty cash
A business entity usually keeps a small sum of cash in the office to meet the
operational requirements, which we call the petty cash. A staff will be assigned to
handle and record the movement of the cash. A separate book will be used to record
the petty cash transactions, which is the Petty Cash Book.

The imprest system


The imprest system is a system used to control and monitor the flow of the petty
cash float. Under this system, the staff in-charge of the petty cash will be given a
fixed amount of money to set up the float. He will make cash payment from this
float and reimburse the amount spent at the end of a predetermined period.

Assuming that the petty cash float is fixed at RM200 and reimbursement is made
on a weekly basis, the diagram below will show how the imprest system works:

RM
At the beginning of week 1 Received money from chief cashier 200

During the week Make payment from the float 180

At the end of week 1 Balance of cash in hand 20


Reimbursement from chief cashier 180
Petty cash in hand after reimbursement 200
8 WAWASAN OPEN UNIVERSITY
BBM 205/05 Business Accounting I

The petty cash book


Below is a sample a petty cash book:

DR CR
Analysis of Payments
Receipts Date Particulars Voucher Total
No. RM Postage Travelling Stationery Office
Expenses

Receipts To record cheque received (Debit side of the petty cash


book).
Date Date of transactions.
Particulars A brief narration of transactions.
Voucher No. Petty cash payment voucher numbers.
Total The sum of payments (Credit side of the petty cash book).
Analysis of payments Extension of relevant expenses column. The total of these
expenses will be posted to the General Ledger at the end
of each month.

The petty cash book forms part of the General Ledger, thus the corresponding entries
will be reflected in the General Ledger, e.g., the corresponding entry for receipts
is on the credit side of the bank book if the reimbursement cheque is drawn from
the bank.

Example 1

2013 RM
Jan 1 Received RM200 from Chief Cashier to start up the petty cash float
5 Paid for stamps 60
9 Paid for transport charges 80
15 Paid for office stationery 30
23 Paid for office refreshment 20
UNIT 4 9
Internal control for cash and correction of errors

Petty Cash Book


Analysis of Payments
Receipts Date Particulars Voucher Total
No. RM Postage Travelling Stationery Office
Expenses
2013
200 Jan 1 Bank
5 Stamps 60 60
9 Transport 80 80
15 Stationery 30 30
23 Refreshment 20 20
190 60 80 30 20
31 Balance c/d 10
200 200
10 Feb 1 Balance b/d
190 Bank

Posting to General Ledger

Postage A/C
Date Particulars Fol RM Date Particulars Fol RM
2013
Jan 31 Petty Cash 60

Transport A/C
Date Particulars Fol RM Date Particulars Fol RM
2013
Jan 31 Petty Cash 80

Stationery A/C
Date Particulars Fol RM Date Particulars Fol RM
2013
Jan 31 Petty Cash 30

Office Expenses A/C


Date Particulars Fol RM Date Particulars Fol RM
2013
Jan 31 Petty Cash 20

Cheque payments to the petty cash float will be recorded on the credit side of the
Bank A/C.
10 WAWASAN OPEN UNIVERSITY
BBM 205/05 Business Accounting I

Bank A/C
Date Particulars Fol RM Date Particulars Fol RM
2013
Jan 1 Petty Cash 200
Feb 1 Petty Cash 190

Activity 4.2

2013 RM

Feb 1 Received RM250 to set up the petty cash float


3 Bought office stationery 35
8 Bought stamps 60
15 Bought detergent for office use 46
20 Bought office refreshment 25

You are required to record the above transactions in the petty cash
book and balance the petty cash book with the calculation of the
reimbursement sum that made up the float.

Activity 4.3

2013 RM
May 1 Balance of petty cash in hand 85
1 Received the reimbursement cheque to restore ?
Imprest to RM300
6 Paid office refreshment 45
12 Paid office stationery 28
16 Paid for transport charges 15
18 Paid for postage 22
23 Paid for office flowers 80
26 Paid for stamps 9

You are required to:

1. Draw up the petty cash book with analysis columns for office
expenses, stationery, transport and postage and balance the petty
cash book at the end of the month.

2. Post the relevant account to the General Ledger.


UNIT 4 11
Internal control for cash and correction of errors

Activity 4.4

Below is the information extracted from the book of KHX Co:

2013 RM
Aug 1 Balance of petty cash in hand ?
1 Received the reimbursement cheque to restore
Imprest to RM350 325
3 Paid taxi fare 50
7 Paid office cleaning 40
11 Paid for utilities charges 80
15 Paid for ink cartridge 35
19 Paid for office refreshment 36
23 Paid for stamps 60

You are required to prepare the petty cash book with analysis
columns for travelling, office expenses, utilities, stationery and
postage.

Summary

The petty cash book is used to record petty cash transactions. The
analysis of payments is used to group the commonly spent items
so that posting to General Ledger is easier.

To enhance the internal control of the petty cash, imprest system


is introduced to make sure that the reimbursed amount is always
the amount spent in the period.
12 WAWASAN OPEN UNIVERSITY
BBM 205/05 Business Accounting I

Suggested answers to activities

Feedback

Activity 4.2

Petty Cash Book


Analysis of Payments
Receipts Date Particulars Voucher Total
No. RM Stationery Postage Office
Expenses
2013
250 Feb 1 Bank
3 Stamps 35 35
8 Transport 60 60
15 Stationery 46 46
20 Refreshment 25 25
166 35 60 71
31 Balance c/d 84
250 250
84 Mar 1 Balance b/d
166 Bank

Activity 4.3

Petty Cash Book


Analysis of Payments
Receipts Date Particulars Voucher Total
No. RM Office Stationery Transport Postage
Expenses

2013
85 May 1 Balance b/d
215 1 Bank
6 Office 45 45
Refreshment
12 Stationery 28 28
16 Transport 15 15
18 Postage 22 22
23 Office 80 80
flowers
26 Stamps 9 9

199 125 28 15 31

31 Balance c/d 101

300 300

101 Jun 1 Balance b/d


199 Bank
UNIT 4 13
Internal control for cash and correction of errors

Bank A/C
Date Particulars Fol RM Date Particulars Fol RM
2013
May 1 Petty Cash 215

Office Expenses A/C


Date Particulars Fol RM Date Particulars Fol RM
2013
May 31 Petty Cash 125

Stationery A/C
Date Particulars Fol RM Date Particulars Fol RM
2013
May 31 Petty Cash 28

Transport A/C
Date Particulars Fol RM Date Particulars Fol RM
2013
May 31 Petty Cash 15

Postage A/C
Date Particulars Fol RM Date Particulars Fol RM
2013
May 31 Petty Cash 31
14 WAWASAN OPEN UNIVERSITY
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Activity 4.4

Petty Cash Book

Analysis of Payments
Receipts Date Particulars Voucher Total
No. RM Travelling Office Utilities Stationery Postage
Expenses

2013
25 Aug 1 Balance b/d
325 Bank
3 Taxi fare 50 50
7 Office 40 40
Cleaning
11 Utilities 80 80
15 Ink cartridge 35 35
19 Refreshment 36 36
23 Stamps 60 60

301 50 76 80 35 60

31 Balance c/d 49

350 350

49 Sep 1 Balance b/d


301 Bank
UNIT 4 15
Internal control for cash and correction of errors

4.3 Performing Bank Reconciliation


Objectives
By the end of this section, you should be able to:

1. Explain the need to reconcile the cash book balance with the bank statement
balance.

2. Prepare the bank reconciliation statement.

Introduction
A business entity will normally operate a current account with the bank. At a fixed
interval, we shall receive a bank statement from the bank showing all the transactions
during the period in the record of the bank. When we receive the bank statement,
we will compare the transactions shown in the bank statement with the records in
our cash book to ensure the correctness and completeness of records.

More often than not, there will be discrepancies between the balances shown in
the bank statement and the cash book. This could be due to the following reasons:

1. Timing differences.

2. Omission in recording.

Timing differences
The bank and the company may not record the transactions at the same time in
their respective books, thus, causing the discrepancies in the balances.

The following circumstances are discrepancies arisen from the timing differences:

1. Unpresented cheques

Unpresented cheques refer to cheque already paid out but the recipients
have yet to present the cheques at the bank for payment.

These payments have been recorded in our cash book but since the bank
has yet to make the payments, it is not entered in the record of the bank.
16 WAWASAN OPEN UNIVERSITY
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2. Uncredited cheques

Uncredited cheques refer to money received and recorded in the cash book,
however, due to the timing of bank-in, at the cut-off point, these transactions
have not been processed by the bank and thus will not appear in the bank
statement.

Omission in recording
At times, the bank will receive payment for the company, for example, a direct credit
by the customers, interest and dividend received directly. The company may not be
aware of these receipts and therefore not able to update the book.

There are also occasions whereby the bank will deduct their service charges directly
from the company’s account. As the company is not being notified, these charges
have not been deducted from the cash book.

Another example will be the dishonoured cheques. Dishonoured cheques are cheques
that cannot be processed due to either the cheques are not in order or there is
insufficient fund in the drawer’s account. However, the records in the cash book may
not be updated promptly as the company has yet to receive the notice from bank.

Example 2

Below is the cash book and bank statement of Dream Work Sdn Bhd for the month
of May 2013:

Cash Book (Bank column only)


Date Particulars Fol RM Date Particulars Fol RM
2013 2013
May 1 Balance b/d 3,750 May 1 Petty Cash 275
3 Sales 370 7 Rental 1,200
9 Paul 750 11 Jopesh 450
15 Sean 1,000 18 Purchases 200
22 Sales 800 25 Telephone 120
29 Shaharil 670 30 Kim 360
31 Balance c/d 4,735
7,340 7,340
Jun 1 Balance b/d 4,735
UNIT 4 17
Internal control for cash and correction of errors

Bank Statement
2013 DR CR Balance
May 1 Balance b/d 3,750
1 Cheque 275 3,475
3 Deposit 370 3,845
8 Cheque 1,200 2,645
12 Deposit 750 3,395
14 Cheque 450 2,945
18 Deposit 1,000 3,945
20 Cheque 200 3,745
21 Bank charges 15 3,730
23 Deposit 800 4,530
28 Cheque 120 4,410
31 Fixed Deposit Interest 35 4,445

In contrast with the entries in the cash book, when we deposit money in the bank,
it is a liability to the bank as they have to make payment to us on demand. Thus a
deposit in the bank is a credit entry in the bank’s record. While we withdraw money
from the bank, the entry will be a debit in the bank’s record.

Upon receiving the bank statement, we will compare the records in the bank
statement with our cash book. From the illustration above, we can see that there is
a discrepancy in the closing balances of both books. Therefore, we have to look for
the causes of the discrepancy.

The result of the checking is found as below:

1. Payment received from Shaharil is not yet credited in the bank statement
(uncredited cheque).

2. Payment to Kim is not yet debited in the bank statement (unpresented


cheque).

3. The bank charges are not recorded in the cash book.

4. Fixed deposit interest has not been taken up in the cash book.

To show the differences, we shall need to draw up a Bank Reconciliation Statement.


We can start the bank reconciliation with either the cash book balance or the bank
statement balance.
18 WAWASAN OPEN UNIVERSITY
BBM 205/05 Business Accounting I

Bank reconciliation statement starting with cash book balance:

Dream Work Sdn Bhd


Bank Reconciliation Statement as at 31st May 2013
RM RM
Credit balance as per Cash Book 4,735
Add: Unpresented Cheque  Kim 360
Fixed Deposit Interest 35 395
5,130
Less: Uncredited Cheque  Shaharil 670
Bank Charges 15 685
Credit balance as per bank statement 4,445

Bank reconciliation statement starting with bank statement:

Dream Work Sdn Bhd


Bank Reconciliation Statement as at 31st May 2013
RM RM
Credit balance as per Bank Statement 4,445
Add: Uncredited Cheque  Shaharil 670
Bank Charges 15 685
5,130
Less: Unpresented Cheque  Kim 360
Fixed Deposit Interest 35 395
Debit balance as per Cash Book 4,735

Updating the cash book


Transactions that have not been taken up in the cash book need to be updated
accordingly in order to show the actual balance available. Based on the illustration
above, we have to record the bank charges and fixed deposit interest in the cash
book to bring the bank balance up-to-date.

Cash Book (Bank column only)


Date Particulars Fol RM Date Particulars Fol RM
2013 2013
May 31 Balance b/d 4,735 May 31 Bank Charges 15
31 Fixed Deposit 35 31 Balance c/d 4,755
Interest
4,770 4,770
Jun 1 Balance b/d 4,755

After adjusting the cash book, only unpresented cheques and uncredited cheques
will be shown in the bank reconciliation statement.
UNIT 4 19
Internal control for cash and correction of errors

Dream Work Sdn Bhd


Bank Reconciliation Statement as at 31st May 2013
RM
Credit balance as per Bank Statement 4,445
Add: Uncredited Cheque  Shaharil 670
5,115

Less: Unpresented Cheque  Kim 360


Debit balance as per Cash Book 4,755

Errors in recording
Apart from the two reasons mentioned above, the discrepancies between the cash
book and bank statement may also due to errors in either cash book or bank
statement.

Example 3

Dream Work Sdn Bhd


Cash Book (Bank column only)
Date Particulars RM Date Particulars Cheque RM
No.
2013 2013
Jul 1 Balance b/d 4,780 Jul 1 Salary 123456 1,800
5 Sales 2,500 5 Rental 123457 1,200
8 Sales 1,650 9 Stationery 123458 245
12 Judy 350 13 Beng 123459 238
18 Din 375 21 Utilities 123460 450
25 Sales 1,300 27 Siti Enterprise 123461 1,160
30 Usaha Jaya 2,670 29 Berjaya Venture 123462 1,730
31 Balance c/d 6,802
13,625 13,625
Aug 1 Balance b/d 6,802
20 WAWASAN OPEN UNIVERSITY
BBM 205/05 Business Accounting I

Bank Statement
2013 Cheque No. DR CR Balance
Jul 1 Balance b/d 123451 5,260
1 Cheque 123456 480 4,780
3 Cheque 1,800 2,980
5 Deposit 2,500 5,480
8 Deposit 1,650 7,130
8 Cheque 123457 1,200 5,930
14 Deposit 350 6,280
16 Cheque 123459 238 6,042
20 Deposit 375 6,417
22 Cheque 123458 254 6,163
25 Deposit 1,300 7,463
28 Cheque 123460 450 7,013
31 Bank charges 15 6,998

After comparing the cash book and the bank statement, it was found that:

1. Payment to Siti Enterprise and Berjaya Venture are not processed yet.

2. Payment from Usaha Jaya has not been credited in the bank statement.

3. Payment for stationery was recorded wrongly in the cash book; the actual
payment should be RM254 instead of RM245.

4. Bank charges of RM15 have not yet been updated in the cash book.

Please note that the clearance of RM480 (cheque number123451) is actually the
unpresented cheque of previous month, thus no adjustment need to be made on this.

The understatement of RM9 for cheque number 123458 has to be rectified in the
cash book. The bank charges have also to be updated to calculate the actual balance
available before preparing the bank reconciliation statement.

Cash Book (Bank column only)


Date Particulars RM Date Particulars RM
2013 2013
Jul 31 Balance b/d 6,802 Jul 31 Stationery 9
(correction of error)
Bank Charges 15
Balance c/d 6,778
6,802 6,802
Aug 1 Balance b/d 6,778
UNIT 4 21
Internal control for cash and correction of errors

Dream Work Sdn Bhd


Bank Reconciliation Statement as at 31st July 2013
RM RM
Credit balance as per Bank Statement 6,998
Add: Uncredited Cheque  Usaha Jaya 2,670
9,668
Less: Unpresented Cheque  Siti Enterprise 1,160
Berjaya Venture 1,730 2,890
Debit balance as per Cash Book 6,778

Activity 4.5

Super Bright Lighting


Cash Book (Bank column only)
Date Particulars RM Date Particulars RM
2013 2013
Apr 1 Balance b/d 2,400 Apr 4 Purchases 1,200
3 Sales 1,500 15 Rental 800
10 Sales 2,750 19 Beng Lighting 1,325
19 Ahmad 680 23 Telephone 198
22 Sales 800 29 John 1,780
28 Clement 925 30 Balance c/d 3,752
9,055 9,055
May 1 Balance b/d 3,752

Bank Statement
2013 DR CR Balance
Apr 1 Balance b/d 2,400
3 Deposit 1,500 3,500
7 Cheque 1,200 2,700
10 Deposit 2,750 5,450
18 Cheque 800 4,650
22 Deposit 680 5,330
21 Cheque 1,325 4,005
23 Deposit 800 4,805
28 Cheque 198 4,607
29 Bank charges 15 4,592

You are required to prepare the bank reconciliation statement as at


30 April 2013 for Super Bright Lighting.
22 WAWASAN OPEN UNIVERSITY
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Activity 4.6

Tasty Catering
Cash Book (Bank column only)
Date Particulars RM Date Particulars RM
2013 2013
Sep 1 Balance b/d 7,630 Sep 2 Petty Cash 300
2 Sales 3,800 5 Purchases 1,300
8 Sales 1,500 9 Green Food 1,717
12 Johnny 2,350 12 Telephone 238
18 Yummy Food 3,670 14 MK Eggs 2,380
22 Mork Graden 1,925 18 Kok Vege 788
24 Sunny Corner 1,458 23 Lye Poultry 1,266
27 Sam 2,500 24 Soo's Store 2,525
29 Ewe 1,843 26 Rental 1,200
28 Annie Bakery 3,574
30 Balance c/d 11,388
26,676 26,676
Oct 1 Balance b/d 11,388

Bank Statement
2013 DR CR Balance
Sep 1 Balance b/d 7,630
2 Cheque 300 7,330
2 Deposit 3,800 11,130
8 Deposit 1,500 12,630
14 Cheque 238 12,392
16 Deposit 2,350 14,742
16 Cheque 1,717 13,025
16 Cheque 2,380 10,645
20 Deposit 3,670 14,315
21 Cheque 1,300 13,015
25 Cheque 788 12,227
26 Deposit 1,458 13,685
28 Cheque 1,200 12,485
30 Interest 66 12,551
30 Bank charges 10 12,541

You are required to prepare the bank reconciliation statement as at


30 September 2013 for Tasty Catering without updating the cash
book.
UNIT 4 23
Internal control for cash and correction of errors

Activity 4.7

Based on the information in Activity 4.6, you are required to update


the cash book and prepare the bank reconciliation statement at as
30 September 2013 for Tasty Catering.

Activity 4.8

Handyman Furniture
Cash Book (Bank column only)
Date Particulars RM Date Particulars Cheque RM
No.
2013 2013
Nov 1 Balance b/d 12,555 Nov 1 Ong Wood Supply 343155 8,480
5 Chun Design 7,850 3 Rental 343156 2,500
8 Sales 4,688 9 Choon Hardware 343157 1,784
10 Boon 3,569 15 Salary 343158 3,600
18 Kok Aun 7,788 18 Solid Wood 343159 15,889
21 Fadzil 5,259 24 James 343160 8,287
24 Jafry 9,056 26 Choon Hardware 343161 887
25 Mini 3,866 27 Purchases 343162 543
26 Sean 4,253 28 Utilities 343163 1,212
28 Judy 850 30 Balance c/d 16,552
59,734 59,734
Dec 1 Balance b/d 16,552

Bank Statement
2013 Cheque No. DR CR Balance
Nov 1 Balance b/d 18,432
3 Cheque 343148 1,327 17,105
5 Cheque 343156 2,500 14,605
8 Deposit 4,688 19,293
9 Deposit 7,850 27,143
9 Cheque 343152 2,550 24,593
9 Cheque 343155 8,480 16,113
12 Deposit 3,596 19,709
17 Cheque 343158 3,600 16,109
19 Stamp Duty 15 16,094
20 Deposit 7,788 23,882
22 Cheque 343159 15,889 7,993
24 Refer to drawer 7,788 205
26 Deposit 9,056 9,261
25 Cheque 343153 2,000 7,261
30 Cheque 343162 534 6,727
30 Interest 98 6,825
24 WAWASAN OPEN UNIVERSITY
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You are required to update the cash book and prepare the bank
reconciliation statement as at 30 November 2013 for Handyman
Furniture.

Summary

A bank reconciliation statement is prepared to identify the


differences between the balance in the cash book and the balance
in the bank statement. After the reconciliation is done, the cash
book has to be updated accordingly to account for the errors or
omission in recording. However, discrepancies due to timing
differences are not required to rectify as the records will be adjusted
in the following months. The purposes of preparing the bank
reconciliation statement are to adjust the cash book balances thus
to ensure the correctness of the balances.

Suggested answers to activities

Feedback

Activity 4.5

Super Bright Lighting


Bank Reconciliation Statement as at 30th April 2013
RM RM
Credit balance as per Bank Statement 4,592
Add: Uncredited Cheque  Clement 925
Bank Charges 15 940
5,532

Less: Unpresented Cheque  John 1,780


Debit balance as per Cash Book 3,752
UNIT 4 25
Internal control for cash and correction of errors

Activity 4.6

Tasty Catering
Bank Reconciliation Statement as at 30th September 2013
RM RM
Debit balance as per Cash Book 11,388
Add: Unpresented Cheque  Lye Poultry 1,266
Soo’s Store 2,525
Annie Bakery 3,574
Interest Received 66 7,431
18,819
Less: Uncredited Cheque  Mok Garden 1,925
Sam 2,500
Ewe 1,843
Bank Charges 10 6,278
Credit balance as per bank statement 12,541

Activity 4.7

Tasty Catering
Cash Book (Bank column only)
Date Particulars RM Date Particulars RM
2013 2013
Sep 30 Balance b/d 11,388 Sep 30 Bank Charges 10
Interest Received 66 Balance c/d 11,444

11,454 11,454
Oct 1 Balance b/d 11,444

Tasty Catering
Bank Reconciliation Statement as at 30th September 2013
RM RM
Credit balance as per Bank Statement 12,541
Add: Uncredited Cheques  Mok Garden 1,925
Sam 2,500
Ewe 1,843 6,268
18,809
Less: Unpresented Cheque  Lye Poultry 1,266
Soo’s Store 2,525
Annie Bakery 3,574 7,365
Debit balance as per Cash Book 11,444
26 WAWASAN OPEN UNIVERSITY
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Activity 4.8

Handyman Furniture
Cash Book (Bank column only)
Date Particulars RM Date Particulars RM
2013 2013
Nov 30 Balance b/d 16,552 Nov 30 Kok Aun 7,788
Boon (correction of 27 (Dishonoured 15
error) cheque) 8,883
Purchases 9 Bank Charges
(correction of error) Balance c/d
Interest Received 98
16,686 16,686
Dec 1 Balance b/d 8,883

Handyman Furniture
Bank Reconciliation Statement as at 30th November 2013
RM RM
Credit balance as per Bank Statement 6,825
Add: Uncredited Cheques  Fadzil 5,259
Mini 3,866
Sean 4,253
Judy 850 14,228
21,053
Less: Unpresented Cheque  Choon Hardware 1,784
James 8,287
Choon Hardware 887
Utilities 1,212 12,170
Debit balance as per Cash Book 8,883
UNIT 4 27
Internal control for cash and correction of errors

4.4 Suspense Accounts and Correction


of Errors
Objectives
By the end of this section, you should be able to:

1. Explain the difference between errors revealed by a trial balance and errors
not revealed by a trial balance.

2. Prepare the Suspense Account.

3. Prepare the Trial Balance after correction of errors.

Introduction
The purpose of preparing a Trial Balance is to check the correctness of accounts in
the ledger. If there are errors, the total amount of debit and credit of the Trial Balance
will not agree. However, there are also errors that will not affect the agreement of
the Trial Balance. When errors are detected, they will be rectified by general journal.

Suspense account and the correction journals


Trial Balance is drawn up to check the correctness of the accounts prepared. If the
trial balance cannot be tallied, it indicates that there are mistakes somewhere. If the
errors which caused the imbalance in the Trial Balance affect only one side of an
account, the correction of these errors will need only one side of the affected account.
Therefore, the Suspense Account is created to make way for the corresponding entries.

Example 4

When preparing the Trial Balance, it was found that the credit total is more than the
debit total by RM120. Subsequent investigation revealed that Discount allowed to
Beng Huat has been credited to his account but omitted from the Discount Allowed
Account. This has caused the imbalance of the Trial Balance. A Suspense Account
is created to accommodate the difference.

Suspense A/C
Difference in books 120
28 WAWASAN OPEN UNIVERSITY
BBM 205/05 Business Accounting I

Suspense Account is created upon detecting the difference in books. Correction


journal is then prepared after determining the affected account.

General Journal
Date Particulars DR CR
Discount Allowed 120
Suspense Account 120
Being correction of error  Discount Allowed
was omitted

Suspense A/C
Difference in books 120 Discount Allowed 120

Errors revealed by the trial balance


A summary of the list of errors revealed by the Trial Balance is shown below:

Types of Error Example


Omission of one entry Cash sale of RM500 was credited to the
Only record one side of the double entry. Sales Account only. The debit entry in the
cash book was omitted.
Error in calculation The total in the Sales Journal was overcast
Miscalculation in the book. by RM100. The wrong total was then
posted to the Sales Account.
Error in amount Rent Account was debited with RM3,000
The amount entered on the debit while the corresponding credit entry in
account was different from the amount the cash book was recorded as RM300.
entered on the credit account.
Posting to the wrong side of an account Discount Allowed RM100 to Fatimah
A transaction was recorded twice on the was credited to her account and also the
same side of the accounts. Discount Allowed Account.
UNIT 4 29
Internal control for cash and correction of errors

Example 5

Meng Meng Co
Trial Balance as at 31 May 2013
RM RM
Capital 30,000
Equipment 8,500
Machinery 3,600
Sales 55,000
Purchases 36,850
Discount Allowed 125
Salaries 3,600
Debtors 15,300
Creditors 11,740
Rent 4,800
Cash 500
Bank 22,300
95,575 96,740

The above Trial Balance is not balanced. Subsequent investigation revealed that:

1. Cash Purchases of RM385 was recorded in the Cash Account but omitted
in the Purchases Account.

2. Cash sales of RM685 was correctly recorded in the Sales Account but
recorded as RM865 in the Cash Account.

3. A payment of RM600 to a creditor was recorded in the Bank Account but


omitted in the Creditors Account.

4. A payment of rental RM360 was omitted in the Rent Account.

Solution

Suspense A/C
RM RM
Difference in books 1,165 Purchases 385
Cash 180 Creditors 600
Rent 360
1,345 1,345
30 WAWASAN OPEN UNIVERSITY
BBM 205/05 Business Accounting I

General Journal
Date Particulars DR CR
Purchases 385
Suspense Account 385
Being correction of error  Purchases was
omitted
Suspense Account 180
Cash 180
Being correction of error  Cash sales was
wrongly recorded
Creditors 600
Suspense Account 600
Being correction of error  Payment from
creditors was omitted
Rent 360
Suspense Account 360
Being correction of error  Rent payment
was omitted

Adjusted Trial Balance:

Meng Meng Co
Trial Balance as at 31 May 2013
RM RM
Capital 30,000
Equipment 8,500
Machinery 3,600
Sales 55,000
Purchases 37,235
Discount Allowed 125
Salaries 3,600
Debtors 15,300
Creditors 11,140
Rent 5,160
Cash 320
Bank 22,300
96,140 96,140
UNIT 4 31
Internal control for cash and correction of errors

Activity 4.9

The following errors were detected in the books of Rahim & Co


after the Trial Balance had been prepared:

1. A cash payment of RM125 for stationery was recorded in the


cash book but not posted to the Stationery Account.

2. Sales of RM632 was correctly recorded in the cash book but


posted as RM623 to the Sales Account.

3. Cash payment of RM255 for utility charges was debited to the


cash and utility accounts.

4. Purchases journal was overcasted by RM25.

You are required to prepare the necessary journal entries to correct


the above errors.

Activity 4.10

Upon preparing the Trial Balance, the book-keeper found that it


failed to agree. Subsequent investigation revealed that:

1. RM442 received from Abu was debited to his account.

2. The total for sales returns journal was overstated by RM175.

3. Discount allowed RM255 was credited to Discount Received


Account.

4. Sales to Jenny of RM447 were not recorded in her account.

You are required to prepare the Suspense Account to correct the


above errors and state the amount for “difference in books”
32 WAWASAN OPEN UNIVERSITY
BBM 205/05 Business Accounting I

Self-test 4.1

The Trial Balance of Big Bean Co could not balance.

Big Bean Co
Trial Balance as at 31 May 2013
RM RM
Capital 10,000
Motor Vehicle 3,500
Office Equipment 7,850
Sales 43,200
Purchases 28,350
Stationery 428
Salaries 5,600
Debtors 8,640
Creditors 10,468
Utilities 3,655
Cash 339
Bank 5,656
64,018 63,668

The following errors were detected:

1. Cash sales of RM130 was recorded in the Cash Account but


omitted in the Sales Account.

2. Cash purchases of RM264 was correctly recorded in the


Purchases Account but recorded as RM246 in the Cash Account.

3. Cheque of RM254 received from Siti was recorded in her


account only.

4. Utility account was overstated by RM456.

You are required to:

1. Prepare the Suspense Account to show the correction of errors.

2. Prepared the adjusted Trial Balance after the correction of errors.


UNIT 4 33
Internal control for cash and correction of errors

Errors not revealed by the trial balance


Not all the errors will affect the agreement of a Trial Balance. Some errors cannot
be detected by the preparation of Trial Balance.

Error of omission  A transaction was completely omitted from the books.

Example: Cash sale of RM500 was not recorded in the books.

Correction: Record the entry when omission is detected.

General Journal
Date Particulars DR CR
Cash 500
Sales 500
Being correction of error  Cash sales was
omitted from the book

Sales A/C
RM RM
Cash 500

Cash A/C
RM RM
Sales 500

Errors of commission  A transaction was posted to the wrong account in the


same category.

Example: Purchases of RM350 from Amy was posted to the account of Annie.

Correction: Reverse the entry from the wrong account and post to the correct
account.

Annie
RM RM
Amy 350 Purchases 350
correction error

Amy
RM RM
Amy 350 Purchases 350
correction
34 WAWASAN OPEN UNIVERSITY
BBM 205/05 Business Accounting I

General Journal
Date Particulars DR CR
Annie 350
Amy 500
Being correction of error  Purchases wrongly
credited to Annie

Errors of principle  A transaction was posted to the wrong account in a different


category.

Example: Purchase of stationery of RM180 was wrongly posted to office equipment


account. The two accounts are of different category, stationery as an expense wrongly
charged to asset.

Correction: Reverse the entry from the wrong account and post to the correct
account.

Office Equipment A/C


RM RM
Cash 180 Stationery correction 180
error

Stationery A/C
RM RM
Office Equipment 180
correction

General Journal
Date Particulars DR CR
Stationery 180
Office Equipment 180
Being correction of error  Purchase of
stationery wrongly debited office equipment

Error of original entry  Wrong amount was recorded in the book of prime entry
and subsequently posted to the ledger.

Example: Sales of RM758 to Ali was recorded as RM785 in the sales journal and
posted to the ledgers.

Correction: Reverse the differential sum from the affected accounts to fix the
situation.
UNIT 4 35
Internal control for cash and correction of errors

Sales A/C
RM RM
Ali 27 Ali error 785
correction

Ali A/C
RM RM
Sales 785 Sales 27
error correction

General Journal
Date Particulars DR CR
Sales 27
Ali 27
Being correction of error  sales to Ali was
overstated by RM27

Compensating errors  An error on the debit side was compensated by an error


of the same amount on the credit side.

Example: RM550 cash purchases was correctly recorded in the cash account but
posted as RM500 to the purchases account. Interest received of RM150 was recorded
correctly in the bank account but posted as RM100 to the Interest Received Account.

Correction: Adjust the effected accounts with the correction amount.

Purchases A/C
RM RM
error
Cash 500
Interest Received 50
correction

Interest Received A/C


RM RM
error
Office Equipment Bank 100
Puchases 50
correction
36 WAWASAN OPEN UNIVERSITY
BBM 205/05 Business Accounting I

General Journal
Date Particulars DR CR
Purchases 50
Interest Received 50
Being correction of error  purchases and
interest received understated by RM50 each

Activity 4.11

The following errors were found in the book of Xiang Xiang


Restaurant:

1. RM80 paid for repairs was recorded as RM8 in both Repairs


Account and Cash Account.

2. RM480 paid for wages was debited to Stationery Account.

3. RM750 received from Judy was credited to John’s account.

4. RM1,500 paid for kitchen equipment was debited to Repairs


Account.

You are required to prepare journal entries to correct the above


errors. (Narrations are not required).

Activity 4.12

1. Discount allowed of RM120 was debited to Adrian’s account


and credited to Discount Allowed Account.

2. RM224 paid to Khatijah was debited to Kamala’s account.

3. Commission received and rental accounts were understated by


RM100 each.

4. Cash sales of RM 458 were completely omitted from the book.

5. RM360 paid for insurance was debited to Utility Account.

You are required to prepare journal entries to rectify the above errors.
(Narrations are not required).
UNIT 4 37
Internal control for cash and correction of errors

Self-test 4.2

The Trial Balance for So Good Enterprise could not balance:

So Good Enterprise
Trial Balance as at 31 July 2013
RM RM
Capital 80,000
Motor Vehicle 33,000
Furniture & Fittings 27,250
Sales 74,630
Purchases 55,884
Rental 6,000
Salaries 10,800
Printing & Stationery 640
Repairs 2,235
Debtors 11,135
Creditors 10,250
Cash 1,792
Bank 13,883
162,619 164,880

The following errors were discovered subsequently:

1. Cash sales of RM200 were completely omitted from the books.

2. RM161 paid for repairs was recorded in the cash book only.

3. Credit purchase of RM1,560 was recorded correctly in the


creditor’s account but recorded as RM156 in the Purchases
Account.

4. RM48 paid for Stationery was recorded on the debit side of


both the Stationery and Bank Accounts.

5. RM1,288 paid for furniture was recorded in the Repairs


Account.

6. RM792 paid for commission was recorded in the cash book


only.

You are required to prepare:

1. The Suspense Account and the necessary journals to rectify the


above errors.

2. The adjusted Trial Balance.


38 WAWASAN OPEN UNIVERSITY
BBM 205/05 Business Accounting I

Summary

There are two types of errors in the books, one is errors revealed
by the Trial Balance and the other one is errors not revealed by the
Trial Balance. Errors revealed by the Trial Balance will affect the
agreement of the Trial Balance. Usually this type of errors will affect
only one side of the double entry, correction has to be done via the
Suspense Account.

Errors not revealed by the Trial Balance are usually caused by errors
that involve both side of the double entry. The correction entries
do not involve the Suspense Account. The revised Trial Balance will
be drawn up after the correction of errors.

Suggested answers to activities

Feedback

Activity 4.9

General Journal
Date Particulars DR CR
Stationery Account 125
Suspense Account 125
Being correction of error  Stationery was
omitted
Suspense Account 9
Sales 9
Being correction of error  Cash sales was
wrongly recorded
Suspense Account 510
Cash 510
Being correction of error  Payment for
utility by cash was debited to cash account
Suspense Account 25
Purchases 25
Being correction of error  Purchases journal
was overcasted
UNIT 4 39
Internal control for cash and correction of errors

Activity 4.10

Suspense A/C
RM RM
Abu 884 Difference in books 102
Sales Returns 175 Jenny 447
Discount Received 255
Discount Allowed 255
1,059 1,059

General Journal
Date Particulars DR CR
Suspense Account 884
Abu 884
Being correction of error  Payment received
from Abu was debited to his account
Suspense Account 175
Sales Returns 175
Being correction of error  Sales returns
journal was overcast
Discount Received 255
Discount Allowed 255
Suspense Account 510
Being correction of error  Discount allowed
was credited to discount received
Jenny 447
Suspense Account 447
Being correction of error  Sales to Jenny
was not recorded in her account

Activity 4.11

General Journal
Date Particulars DR CR
Repairs 72
Cash 72
Wages 480
Stationery 480
John 750
Judy 750
Kitchen Equipment 1,500
Repairs 1,500
40 WAWASAN OPEN UNIVERSITY
BBM 205/05 Business Accounting I

Activity 4.12

General Journal
Date Particulars DR CR
Discount Allowed 240
Adrian 240
Khatijah 224
Kamala 224
Rental 100
Commission Received 100
Cash 458
Sales 458
Insurance 360
Utility 360
UNIT 4 41
Internal control for cash and correction of errors

Summary of Unit 4

Summary

In this unit, we have learnt about the need for internal control
in any organisation. Besides, we learnt how an effective internal
control system assists in improving the workflow and safeguarding
the company’s assets. We also learnt about the commonly used
internal control features for cash and its equivalent. The imprest
system is recommended for the petty cash float, where a systematic
reimbursement method is used to prevent fraud.

Bank reconciliation statement is prepared at a fixed interval to


ensure the accuracy and completeness of records. The discrepancies
between the cash book and bank statement will be investigated and
reconcile to ascertain no mismanagement of the company’s fund.

When a Trial Balance cannot agree, there is indication that errors


has occurred in the books. A Suspense Account is created as an
intermediate account to enable rectification adjustments being
recorded. After putting through the adjusting entries, the suspense
account should be eliminated.

There are also errors not affecting the agreement of the trial balance.
These errors can be rectified by preparing adjusting journal entries.
After the adjustments, the adjusted trial balance has to be prepared
to show the updated balances.
42 WAWASAN OPEN UNIVERSITY
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UNIT 4 43
Internal control for cash and correction of errors

Unit Practice Exercise


1. Below is the information extracted from the book of ZZ Co:

2013 RM
Jan 1 Balance of petty cash in hand 74
1 Received the reimbursement cheque to restore Imprest to RM350 ?
3 Paid for office flowers 36
7 Paid for A4 papers 87
13 Paid for taxi fare 45
18 Paid for toner 75
21 Paid for PosLaju 12
27 Paid for stamps 60

You are required to prepare the petty cash book with analysis columns for
travelling, office expenses, stationery and postage.

2. Advance Sdn Bhd


Cash Book (Bank column only)
Date Particulars RM Date Particulars Cheque RM
No
2013 2013
Jun 1 Balance b/d 5,250 Jun 1 Rental 331235 1,800
3 Sales 3,600 5 Stationery 331236 300
5 Fatimah 1,300 9 Donny 331237 1,717
10 Sales 1,180 13 Beng Choon 331238 1,333
15 May 1,375 21 Telephone 331239 458
25 Sales 1,474 27 Johan Enterprise 331240 2,320
29 Sunny 670 30 Balance c/d 6,921
14,849 14,849
Jul 1 Balance b/d 6,921

Bank Statement
2013 Cheque No DR CR Balance
Nov 1 Balance b/d 5,250
3 Deposit 3,600 8,850
7 Deposit 1,300 10,150
8 Cheque 331235 1,800 8,350
8 Cheque 331236 300 8,050
9 Refer to drawer 1,300 6,750
10 Deposit 1,180 7,930
18 Deposit 1,375 9,305
18 Cheque 331238 1,335 7,970
20 Cheque 331237 1,717 6,253
26 Deposit 1,474 7,727
28 Cheque 331239 458 7,269
44 WAWASAN OPEN UNIVERSITY
BBM 205/05 Business Accounting I

You are required to update the cash book and prepare the bank reconciliation
statement as at 30 June 2013 for Advance Sdn Bhd.

3. The Trial Balance for Perfect Vision Enterprise could not balance:

Perfect Vision Enterprise


Trial Balance as at 31 August 2013
RM RM
Capital 100,000
Motor Vehicle 56,000
Computers 16,345
Sales 59,598
Purchases 46,463
Purchases Returns 339
Discount Allowed 540
Rental 10,800
Salaries 15,000
Printing & Stationery 543
Debtors 14,229
Creditors 13,749
Cash 214
Bank 10,575
170,709 173,686

The following errors were discovered subsequently:

a. Commission received of RM550 was recorded in the cash book only.

b. Cash payment of RM150 for stationery was completely omitted from the
books.

c. Discount received of RM188 was debited to discount allowed account.

d. Sales of RM3,903 to Richard was not recorded in his account.

e. RM1,500 for upkeep of motor vehicle was debited to motor vehicle account.

You are required to prepare:

a. The Suspense Account and the necessary journals to rectify the above errors.
(Narrations are not required).

b. The adjusted Trial Balance.

c. The Suspense Account and the necessary journals to rectify the above errors.
(Narrations are not required).

d. The adjusted Trial Balance.


UNIT 4 45
Internal control for cash and correction of errors

Suggested Answers to Self-tests

Feedback

Self-test 4.1

Suspense A/C
RM RM
Sales 130 Difference in books 350
Cash 18 Bank 254
Utility 456
604 604

General Journal
Date Particulars DR CR
Suspense Account 130
Sales 130
Being correction of error  Sales was omitted
Suspense Account 18
Cash 18
Being correction of error  Cash purchases
was wrongly recorded
Bank 254
Suspense Account 254
Being correction of error  Payment from
debtor was omitted
Suspense Account 456
Utility 456
Being correction of error  Utility overstated

Big Bean Co
Trial Balance as at 31 October 2013
RM RM
Capital 10,000
Motor Vehicle 3,500
Office Equipment 7,850
Sales 43,330
Purchases 28,350
Stationery 428
Salaries 5,600
Debtors 8,640
Creditors 10,468
Utilities 3,199
Cash 321
Bank 5,910
63,798 63,798
46 WAWASAN OPEN UNIVERSITY
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Sels-test 4.2

General Journal
Date Particulars DR CR
Cash 200
Sales 200
Repairs 161
Suspense Account 161
Purchases 1,404
Suspense Account 1,404
Suspense Account 96
Bank 96
Furniture 1,288
Repairs 1,288
Commission 792
Suspense Account 792

Suspense A/C
RM RM
Difference in books 2,261 Repairs 161
Bank 96 Purchases 1,404
Commission 792
2,357 2,357

So Good Enterprise
Trial Balance as at 31 July 2013
RM RM
Capital 80,000
Motor Vehicle 33,000
Furniture & Fittings 28,538
Sales 74,830
Purchases 57,288
Rental 6,000
Salaries 10,800
Printing & Stationery 640
Repairs 1,108
Debtors 11,135
Creditors 10,250
Cash 1,992
Bank 13,787
Commission 792
165,080 165,080
UNIT 4 47
Internal control for cash and correction of errors

Suggested Answers to Unit Practice


Exercise

Feedback

1.

Analysis of Payments
Receipts Date Particulars Voucher Total
No. RM Travelling Office Stationery Postage
Expenses

2013
74 Jan 1 Balance
276 1 Bank
3 Office 36 36
flowers
7 A4 Paper 87 87
13 Taxi fare 45 45
18 Toner 75 75
21 PosLaju 12 12
27 Stamps 60 60

325 45 36 162 72

31 Balance c/d 35

350 350

35 Feb 1 Balance b/d


315 Bank

2.

Advance Sdn Bhd


Cash Book (Bank column only)
Date Particulars RM Date Particulars RM
2013 2013
Jul 30 Balance b/d 6,921 Jun 30 Fatimah 1,300
(Dishonoured
cheque)
Beng Choon 2
(Correction of
Error)
30 Balance c/d 5,619
6,921 6,921
Jul 1 Balance b/d 5,619
48 WAWASAN OPEN UNIVERSITY
BBM 205/05 Business Accounting I

Advance Sdn Bhd


Bank Reconciliation Statement as at 30 June 2013
RM RM
Credit balance as per Bank Statement 7,269
Add: Uncredited Cheques  Sunny 670
7,939

Less: Unpresented Cheque  Johan Enterprise


Debit balance as per Cash Book 2,320
5,619

3.

General Journal
Date Particulars DR CR
Suspense Account 550
Commission Received 550
Stationery 150
Cash 150
Suspense Account 376
Discount Received 188
Discount Allowed 188
Richard 3,903
Suspense Account 3,903
Upkeep of Motor Vehicle 1,500
Motor Vehicle 1,500

Suspense A/C
RM RM
Difference in books 2,977 3,903
Commission Received 550
Discount Received 188
Discount Allowed 188
3,903 3,903
UNIT 4 49
Internal control for cash and correction of errors

Perfect Vision Enterprise


Trial Balance as at 31 August 2013
RM RM
Capital 100,000
Motor Vehicle 54,500
Computers 16,345
Sales 59,598
Purchases 46,463
Purchases Returns 339
Discount Allowed 352
Discount Received 188
Rental 10,800
Salaries 15,000
Printing & Stationery 693
Commission Received 550
Upkeep of Motor Vehicle 1,500
Debtors 18,132
Creditors 13,749
Cash 64
Bank 10,575
174,424 174,424
50 WAWASAN OPEN UNIVERSITY
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UNIT 4 51
Internal control for cash and correction of errors

Reference
Li, B, Tan, S K, Goh, L C and Goh, L S (2003) Principles of Accounts, Singapore:
Times Media Private Limited.