Question

Blueprint Connection: Cash and Bank Reconciliation

Cash and Cash Controls

Cash includes coins, paper currency, checks, money orders, and money deposited with a financial institution that the company can withdraw at any time. The key to classification of an amount as cash is that it be readily available to pay debts. Cash is a   reported on the  . Cash also includes items properly classified as cash equivalents. These are limited to investments that are readily convertible to known amounts of cash and have an original maturity to the investor of three months or less.

Bank Reconciliation

A bank reconciliation explains the causes for any differences between a company's cash balance on its bank statement and its cash balance on the books (that is, in the ledger. )

Allez Company's monthly bank statement shows an account balance of $6319.17. The cash balance in its ledger is $5457.95.

A thorough bank reconciliation investigation yields the following information:

The bank erroneously deducted $335.95 from the company's account when the actual amount of a check written by the company was $325.95.

The company erroneously recorded a check it wrote for $356.87 as $557.93.

The company recently made a $650.72 deposit that has not yet been reflected on the bank statement.

The bank collected a $500.00 note receivable, plus $14.00 in interest, which has not been recorded in the company's records.

Bank service charges of $18.00 have been assessed to the company's account.

There are two checks outstanding (not yet appearing on the bank statement) that were written for $775.40 and $533.44.

A $483.96 check from one of the company's customers, Phil Conners, was returned by the bank because of insufficient funds (NSF) in the customer's account.

Prepare the bank reconciliation for Allez Co. Enter amounts to the nearest cent.

Allez Co.
Bank Reconciliation
January 31, 2014
Cash balance per bank statement		$
	$
		$
Adjusted balance		$
Cash balance per company records		$
	$
		$
	$
Adjusted balance		$

Cash management and Control

Effective cash management and control over cash includes which of the following? (YES or NO)

1.	Delaying payment of liabilities as long as possible
2.	Speeding up collection of receivables
3.	Investing idle cash to earn the greatest possible return while still being able to meet cash needs
4.	With the exception of a petty cash fund, making all disbursements by check.
5.	Paying suppliers earlier than payment terms require
6.	Preparing bank reconciliations
7.	Purchasing excess inventory with excess cash
8.	Deploying procedures to safeguard cash
9.	Depositing cash receipts when the amount reaches a predetermined level
10.	Use of petty cash funds for minor disbursements
11.	Approving suppliers before purchasing from them
12.	Segregating cash duties

Answer 1

Answer to first question in the list: EXPLANATION: Deposit in transit would have increased firm's book balance but bank balance wouldn't have been updated and so it is added to bank balance; Allez Co. Bank Reconciliation January 31, 2014 Cash balance per bank statement Add: Deposit in transit $650.72 Error in pay check $10.00 $6,319.17 Outstanding checks would have decreased firm's book balance but bank balance wouldn't have been updated and so it is deducted from bank balance; $660.72 [Error = $335.95 - $325.95 = $10.00] $6,979.89 $1,308.84 ($775.40 + $533.44] Bank charges would have decreased firm's bank balance but book balance wouldn't have been updated and so it is deducted from book balance; Subtract: Outstanding checks Excess recorded pay check would have decreased book balance but bank balance wouldn't have been affected and so it is deducted from book bal. Adjusted balance Balance per firm's books Error in recording pay check Note collected by bank Interest on Note collected $5,671.05 $5,457.95 [Error = $557.93 - $356.87 = $201.06] $201.06 $500.00 $14.00 NSF check would have decreased bank balance but it wouldn't have been updated in cash book and so it shall be deducted from book balance. $715.06 $6,173.01 Note collected by bank along with interest thereon would have increased bank balance but it wouldn't have been updated in cash book and so it shall be added to book balance. Subtract: Bank charges NSF check returned $18.00 $483.96 $501.96 $5,671.05 Adjusted balance