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Chapter 7: Q12RQ (page 411)
When are the only times the Petty Cash account is used in a journal entry?
The petty cash account used the transaction of the petty cash fund made.
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Identifying internal controls. Consider each situation separately. Identify the missing internal control procedure from these characteristics:
鈥� Assignment of responsibilities
鈥� Separation of duties
鈥� Audits
鈥� Electronic devices
鈥� Other controls (specify)
a. While reviewing the records of Quality Pharmacy, you find that the same Team member orders merchandise and approves invoices for payment.
b. Business is slow at Amazing Amusement Park on Tuesday, Wednesday, and Thursday nights. To reduce expenses, the business decides not to use a ticket taker on those nights. The ticket seller (cashier) is told to keep the tickets as a record of the number sold.
c. The same trusted team member has served as a cashier for 12 years.
d. When business is brisk, Fast Mart deposits cash in the bank several times during the day. The manager at one store wants to reduce the time employees spend delivering cash to the bank, so he starts a new policy. Cash will build up over weekends, and the total will be deposited on Monday.
e. Grocery stores such as Convenience Market and Natural Foods purchase most merchandise from a few suppliers. At another grocery store, the manager decides to reduce paperwork. He eliminates the requirement that the receiving department prepare a receiving report listing the goods actually received from
the supplier.
List internal control procedures related to e-commerce.
Preparing a bank reconciliation and journal entries
The December cash records of Davidson Insurance follow:
Davidson鈥檚 Cash account shows a balance of \(17,450 at December 31. On December
31, Davidson Insurance received the following bank statement:
Additional data for the bank reconciliation follow:
a. The EFT credit was a receipt of rent. The EFT debit was an insurance payment.
b. The NSF check was received from a customer.
c. The \)1,400 bank collection was for a note receivable.
d. The correct amount of check no. 1419, for rent expense, is \(1,930. Davidson鈥檚
controller mistakenly recorded the check for \)1,390.
Requirements
1. Prepare the bank reconciliation of Davidson Insurance at December 31, 2018.
2. Journalize any required entries from the bank reconciliation.
What are two common methods used when accepting deposits for credit card and debit card transactions?
How do businesses control cash receipts over the counter?
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