E7-4 Identify internal control weaknesses over cash

disbursment and suggest improvement!

a Weaknesses Sugggested Impro

1 Checks are not prenumbered. Use prenumbered checks.

2 The purchasing agent signs checks Only Treasurer's department personnel

3 Unissued checks should be stored in a lo
Unissued checks are stored in unlocked file cabinet restrcted to authorized personnel
4
Purchasing Agent approves and pays for goods purchased Purchasing agent should approve bills fo
5
After payment, the invoice is filled The invoice should be stamped paid.
6 The purchasing agent records payments in cash Only accounting department personall s
disbursement journal disbursment.
7 Only accounting department personall s
The treasurer records the checks in cash disbursement disbursment.
8
The treasurer reconciles the bank statement An internal auditor should reconcile the
 Sugggested Improvement Explanation

red checks. To avoid double entry or no entry

Risk : Purchasing Agent receives Kickback, or make fictive or innappropriate
's department personnel should sign the checks payment or ship goods to himself.
ks should be stored in a locked file cabinet with acces
thorized personnel Prone to be stolen

nt should approve bills for payment by treasurer Risk : Purchasing Agent receives Kickback, or make fictive or innappropriate paym

ould be stamped paid. To avoide double disbursment

g department personall should record cash
Risk : Purchasing Agent receives Kickback, or make fictive or innappropriate paym
g department personall should record cash
Prevent the treasurer

ditor should reconcile the bank statement.

ke fictive or innappropriate

ke fictive or innappropriate payme

ke fictive or innappropriate payme

LO5

P7-2B Journalize and Post Petty Cash Fund Transactions!

a Journalize the petty cash transactions!
De Smet SA
Partial Journal Entry- Petty Cash
For July & August Period

Dates Account Title & Explanation Dr Cr

July 1 Petty Cash 100
Cash 100

Establish Petty Cash Account

15 Freight Out 51
Postage Expense 20.5
Entertainment Expense 23.1
Miscellanous Expense 4.1
Cash 94.9
Cash Over or Short 3.8
Replenishing Petty Cash account & recording cash
surplus
31 Freight Out 43.5
Charitable Contribution Expense 20
Postage Expense 20.1
Miscellanous Expense 9.3
Cash 92.9
Replenish Petty Cash Account
August 15 Freight Out 40.2
Entertainment Expense 21
Postage Expense 14
Miscellanous Expense 19.8
Cash Shortage 3
Cash 98
Replenishing Petty Cash account & recording cash
shortage
16 Petty Cash 50
Cash 50
Increase petty cash acount amount
31 Freight Out 74
Entertainment Expense 43.2
Postage Expense 17.7
Cash Shortage 2.1
Cash 137
Replenishing Petty Cash account & recording cash
shortage
b Post to the Petty cash
accounts
Petty Cash
100
50
150

c Internal Control features of a

petty cash fund
1 A custodian is responsible for the fund
A prenumbered petty cash receipt
2
signed by the custodian and the
individual receving payment is
required for each payment from the
fund
3
The office's treasurer examines all
payments and stamps supporting
document to indicate they were paid
when the fund is replenished.
4 Surprise counts can be made at any
time to determine wether the funds is
intact
LO6- Identify the control fetures of a bank account.
BE7-10
a Control Benefit of check
Check provides documentary evidence of the payment of a specified sum of money to
a designated payee.
b. Control Benefit of Bank Statement
A bank statement provides a double record of a depositor's bank transactions. It also
is used in making periodic independent bank reconciliations.
P7-5A Cayemberg AG (1)
Bank Reconciliation
On July 31

Cash Balance per Bank Statement 24505

Add: Deposit In Transit (1) 7100 (2)
Less: Outstanding Check (2) 8460
Bank Error 100
Adjusted Cash Balance per Bank 23045

Cash Balance per Book 21550

Add: Collection of Notes By Bank 1470
Book Error 90
Less Bank Charge 65 65
Adjusted Cash Balance per Book 23045

P7-5B Tizani SpA 1

Bank Reconciliation
August 31, 2017

Cash Balance per Bank Statement 17146

Add: Deposit In Transit (1) 4729 2
Bank Error 20
Less: Outstanding Check (2) 4424
Adjusted Cash Balance per Bank 17471

Cash Balance per Book 12815

Add: Collection of Notes By Bank 4546
Book Error 140
Less Bank Charge 65 30
Adjusted Cash Balance per Book 17471

P7-6B Stupendous Ltd b

Bank Reconciliation
October 31, 2017

Cash Balance per Bank Statement 15313 c

Add: Deposit In Transit (1) 3226.18
Bank Error
Less: Outstanding Check (2) 915.87
Adjusted Cash Balance per Bank 17623.31

Cash Balance per Book 18608.81

Add: Collection of Notes By Bank 460
Book Error

Adjusted Cash Balance per Book before Theft 19068.81

Theft 1445.5
 Adjusted Cash Balance per Book 17623.31

P3-7B Aglife Genetics Ltd

Bank Reconciliation Adjusting
May 31, 2017
Dates
Cash Balance per Bank Statement 12648
Add: Deposit In Transit (1) 2100
Bank Error 900
Less: Outstanding Check (2) 1425
Adjusted Cash Balance per Bank 14223

Cash Balance per Book 13287

Add: Collection of Notes By Bank 4100 4100
Less; Bank Charge 60
Book Error 100
Book Error 992
NSF Check 2012 3164
Adjusted Cash Balance per Book 14223

P4-7B Brasilia SA (1)

Bank Reconciliation
November 30, 2017

Cash Balance per Bank Statement 9100

Add: Deposit In Transit (1) 1581 (2)
Bank Error
Less: Outstanding Check (2) 3480
Adjusted Cash Balance per Bank 7201

Cash Balance per Book 5969

Add: Collection of Notes By Bank 1391

Less; Bank Charge 51

Book Error 108
Adjusted Cash Balance per Book 7201
July receipts per books 81100 b Cayembe
July deposits per bank 81000 Adjusting Entry- Bank
Less: Depoist in Transit June 30 7000 74000 July 31, 20
Deposit in Transit July 31 7100 Dates

July Disbursment per books 77150

Less: Book Error 90
Adjusted July Disbursment per books 77060
July Bank's Check Clearing 74700
Add: Bank Error 100
Less: June 30 Outstanding Check 6200 68600
Outstanding Check, July 31 8460

Augusut receipts per books 50050 Cayembe

August deposits per bank 47521 Adjusting Entry- Bank
Less: Deposit in Transit on July 2200 45321 July 31, 20
Deposit in Transit July 31 4729 Dates

August Disbursment per books 47794

Less: Book Error 140
Adjusted August Disbursment per books 47654
August Bank's Check Clearing 46175
Less: Bank Error 20
Less: July 31 Outstanding Check 2925 43230
Outstanding Check, August 31 4424

1 Not Listing as outstanding three checks totalling $450 ( No. 62, $107,74; No, 183, $127,5; and No.
2 Underfooting the outstanding checks listed by $75 (The correct total is $465,37)
3 Substracting the $460 bank credit from the book balance instead of adding it to the book balance

1 The principle of independent internal verification has been viplated because the cashier prepared
2 The principle of segregation of duties has been violated because the cashier had access to the acc
 Cayemberg
Adjusting Entry- Bank Reconciliation
July 31, 2017
Account Title & Explanation Dr Cr
Cash 4100
Notes Receivable 4000
Interest Receivable 200
Account Receivable 2012
Cash 2012
Miscellanous Expense 60
Cash 60
Sales Revenue 100
Cash 100
Account Payable 992
Cash 992

November receipts per books 9632

Less: Book Errors 18 9614
November deposits per bank 8875
Less: Deposit in Transit October 30 842 8033
Deposit in Transit November 30 1581
July Disbursment per books 8197
Add: Book Error 90
Adjusted July Disbursment per books 8287
July Bank's Check Clearing 7115
Add: Bank Error
Less: June 30 Outstanding Check 2308 4807
Outstanding Check, July 31 3480
 Cayemberg
Adjusting Entry- Bank Reconciliation
July 31, 2017
Account Title & Explanation Dr Cr
Cash 1470
Notes Receivable 1400
Interest Receivable 70
Cash 90
Account Payable 90
Miscellanous Expense 65
Cash 65

Cayemberg
Adjusting Entry- Bank Reconciliation
July 31, 2017
Account Title & Explanation Dr Cr
Cash 4546
Notes Receivable 4505
Interest Receivable 41
Cash 140
Account Payable 140
Miscellanous Expense 30
Cash 30

, $107,74; No, 183, $127,5; and No. 284, $215,26)

t total is $465,37)
ad of adding it to the book balance, thereby concealing $920 of the theft

lated because the cashier prepared the bank reconciliation

se the cashier had access to the accounting records abd also prepared the bank reconciliation
LO8- EXPLAIN THE STATEMENT PRESENTATION OF CASH BALANCES

BE7-15 Sokolov OAO Company should report Cash in Bank and Payroll Bank aacount as Current
Assets. Plant Expansion Fund Cash should be reported as a noncurrent asset, assuming the
fund is not expected to be used during the next year.

E7-14 a Cash and cash equivalents should be reported at $83.500

Cash in Bank
Cash on Hand
Petty Cash
Highly Liquid Investment

b - Cash in plant expansion fund should be reported as part of long term investment
- Receivables from customers should be reported as AR in Current Assets
- Share Investment should be reported in Current Assets.

c Nayak should disclose in the financial statements an explanation of what entails each cash
equivalent
a Papadupolous SA
General Journal- Perpetual
For The Year Ended Dec 31, 2017
Dates Account Title & Explanation Ref Dr Cr
Dec 7 Cash 3600
Account Receivable 3600
 12 Inventory 12000
Account Payable 12000
17 Account Receivable 16000
Sales Revenue 16000
COGS 10000
Inventory 10000
19 Salaries & Wages Expense 2200
Cash 2200
22 Account Payable 12000
Cash 11880
Inventory 120
26 Cash 15680
Sales Discount 320
Account Receivable 16000
31 Cash 2700
Account Receivable 2700

b
b&e
 Cash Acc Depreciation Equipment Insurance Expense
18200 2200 3000 400
3600 11880 200
15680 680 3200
2700
2000
 27420 Salaries Expense
2200
Notes Receivable Accounts Payable
2000 2000 12000 6100
0 12000
6100 Sales Discount
320

Account Receivable Share Capital Ordinary

7500 3600 50000
16000 16000 50000
680 2700
1880 Retained Earnings
14200
14200
Inventory
16000 10000 Sales Revenue
12000 120 16000
17880 16000

COGS
Prepaid Insurance 10000
1600 400 10000
1200

Equipment Depreciation Expense

28000 200
28000
c Papadupolous SA d
Statement of Bank Reconciliation for Cash Balance A
For the Period End of December 31, 2017
No
Bank Statement 1
Cash Balance per Bank 25930
Add: DIT 2700 2
Less: Outstanding Check 1210
Adjusted Cash Balance per Bank 27420
Book Record 3
Cash Balance per Book 2000
Add: Notes Collection by Bank 2000 4
Less: NSF Check 680
Adjusted Cash Balance per Bank 3320
 Papadupolous SA f
Adjusting Entry Journal
Dec, 31 2017
Account Title & Explanation Ref Dr Cr
Cash 2000
Notes Receivable 2000
Account Receivable 680
Cash 680
Above are adjsutments due to Bank Reconciliation
Depreciation Expense 200
Acc. Depreciation Equipment 200
Insurance Expesne 400
Prepaid Insurance 400

g
 Papadupulous SA
Adjusted Trial Balance
Dec 31, 2017
Debit Credits
Cash 27420 Accumulated Depreciation Equipment 3200
Notes Receivable 0 Accounts Payable 6100
Account Receivable 1880 Share Capital Ordinary 50000
Inventory 17880 Retained Earnings 14200
Prepaid Insurance 1200 Sales Revenue 16000
Equipment 28000 TOTAL 89500
COGS 10000
Salaries Expense 2200
Depreciation Expense 200
Insurance Expense 400
Sales Discount 320
TOTAL 89500

Papadupolous SA Papadupolous SA
Income Statement Classified Statement of Financial P
For The Year Ended Dec 31, 2017 For The Year Ended Dec 31, 20

Sales Revenue 16000 Current Assets

Less Sales Discount 320 Cash
Net Sales 15680 Account Receivable
Less COGS 10000 Inventory
Gross Profit 5680 Prepaid Insurance
Less: Operating Expenses Plant & Equipment
1 Salaries Expenses 2200 Equipment
2 Depreciation Expenses 200 Total Assets
3 Insurance Expenses 400 -2800 Current Liability
Net Income 2880 Account Payable
Equity
Acc Depreciation Equipment
Share Capital Ordinary
Retained Earnings
Total Liability & Equity
 Papadupolous SA
Statement of Financial Position
he Year Ended Dec 31, 2017

urrent Assets
27420
1880
17880
1200 48380
nt & Equipment
28000 28000
76380
urrent Liability
6100 6100
Equity
3200
50000
17080 70280
76380