9 Cash

1
Cash
Learning Objectives
Unit 9
1. Establish and account for a Change

Fund.
2. Establish and account for a Petty
Cash Fund.
3. Describe the use of commercial
banking services for cash
transactions.
4. Analysis: Compute and explain
liquidity measures, the doomsday
ratio and the quick or acid test ratio
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Cash and Cash

Equivalents
Note that the
term cash
implies both
cash and cash
equivalent
accounts.
Cash equivalents:
equivalents:
Cash
Short term
terminvestments
investmentsthat
thatare
are
Short
highlyliquid
liquid
highly
Ableto
tobe
beconverted
convertedto
toknown
known
Able
amountsof
of cash.
cash. (maturities
(maturitiesof
of33
amounts
monthsor
or less)
less)
months
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Cash and Cash

Equivalents
Examples of
of cash
cash equivalents
equivalents are
are
Examples
Treasury bills
bills
Treasury
Money market
market funds
funds
Money
Bank deposits
deposits and
and *commercial
*commercial paper
paper
Bank
*(issued
issuedby
bypublic
publiccorporations)
corporations)
*(
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Objective 9.1:
Establish and account
for a Change Fund.
O9.1
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Establish Change Fund

KAYOKO'S GIFTS
BALANCE SHEET
As of 12/31/07
ASSETS
Cash
Change Fund
Accounts Receivable
Inventory
Supplies
Current assets
Equipment
Total
O9.1
14,650
0
1,240
104,500
2,100
122,490
54,650
299,630
LIABILITIES
Accounts Payable
Current liabilities
Notes Payable
Total
EQUITY
Owner, Capital
Total
45,000
45,000
16,500
61,500
238,130
299,630
The Chart of
Accounts is modified
to include a new
ledger account
Change Fund
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KAYOKO'S GIFTS
BALANCE SHEET
As of 12/31/07
ASSETS
Cash
Change Fund
Accounts Receivable
Inventory
Supplies
Current assets
Equipment
Total
O9.1
14,500
150
1,240
104,500
2,100
122,490
54,650
299,630
LIABILITIES
Accounts Payable
Current liabilities
Notes Payable
Total
EQUITY
Owner, Capital
Total
45,000
45,000
16,500
61,500
238,130
299,630
A journal entry
moves the change
fund total from
Cash to Change
Fund
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GENERAL JOURNAL
Date
Description
14-Sep
PR
Change Fund
Page 15
Debit
105
Cash
Credit
150.00
100
150.00

LEDGER
Account Nam e: CASH
Date
2007
Item
Balance Forward
1 4-Sep
Acct #: 100
Post
Ref.
BALANCE
Debit
Credit
J15
1 4-Sep
O9.1
Item
Credit
14,650.00
LEDGER
150.00 14,500.00
Account Nam e: CHANGE FUND

Date
2007
Debit
Post
Ref.
J15
A cct #: 105
BALANCE
Debit
150.00
Credit
Debit
Credit
150.00
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Change Fund
Controls:
Some of the important controls to consider when
dealing with cash drawers are:
Individual responsibility
Segregation of duties
The cashier must accept responsibility for the
change fund and cash received. The cashier should
not be allowed to record the results of cash sales
activities into the accounting system.
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At any point
in time, the
total of the
cash register
tape for sales
plus the
beginning
change fund
should equal
the total
ending cash
count.
Change Fund Equation
CashRegister
10.00
10.00
28.00
28.00
7.00
7.00
98.00
98.00
43.00
43.00
Sales
total
189.00
Sales total 189.00
$
Beginning Change
Fund
Register Tape Sales

total
$
O9.1
Ending Cash Count

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Change Fund Example

Register tape sales total for the cashiers shift
Ending cash count $1043
$895
10.00
10.00
28.00
28.00
7.00
7.00
98.00
98.00
43.00
43.00
Sales total 895.00
Sales total 895.00
Using the equation, beginning change fund + register

tape sales should equal ending cash count however,
$150
895
$1045
Therefore, cash is short $2 and the Cash Short and Over
account will be used to record this expense (debit). If the
cash count exceeded $1045, the Cash Short and Over
account would have been used to record the gain (credit).
O9.1
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11
Journalize
Cash Sales
The cash count total
of $1,043 is not
journalized.
We simply record
the effect on the
regular cash account
with a debit for the
actual increase in
cash $1,043 - $150 =
$893
No entry is made to
the Change Fund
except to increase or
decrease it.
O9.1
GENERAL JOURNAL
Date
Description
Page 15
Debit
PR
15-Sep Cash
Cash Short & Over
Sales
Credit
100
893.00
599
2.00
400
895.00
LEDGER
Account Nam e: CASH
Date
2007
Item
Acct #: 100
Post
Ref.
BALANCE
Debit
Debit
Credit
14,500.00
Balance Forward
1 5-Sep
Credit
J15
893.00
15,393.00
LEDGER
Account Nam e: SALES
Date
2007
Item
A cct #: 400
BALANCE
Post
Ref.
Debit
Credit
Debit
Credit
56,340.00
Balance Forward
1 5-Sep
J15
895.00
57 ,235.00
LEDGER
Account Nam e: CASH SHORT & OVER
Date
2007
1 5-Sep
Item
Post
Ref.
A cct #: 599
BALANCE
Debit
Credit
Debit
Credit
3.00
Balance Forward
J15
2.00
5.00
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Change Fund Problem

End of day register tape cash sales total is
$558.25
Cash count is $759.25
Change Fund is $200
Journalize the days cash revenue

O9.1
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Journalize
Cash Sales
GENERAL JOURNAL
Date
Description
The actual
increase in cash is:
$759.25 minus
$200 = $559.25.
Record the
increase in cash,
the days sales total
and balance the
entry with Cash
Short & Over as
necessary.
O9.1
Debit
PR
15-Sep Cash
100
Cash Short & Over

Sales
The cash count

total of $759.25
isnt journalized.
Page 15
Credit
559.25
599
1.00
400
558.25
LEDGER
Account Nam e: CASH
Date
2007
Item
Acct #: 100
Post
Ref.
BALANCE
Debit
Credit
17 ,400.00
Balance Forward
1 5-Sep
Debit
Credit
J15
559.25
17 ,959.25
LEDGER
Account Nam e: SALES
Date
2007
Item
A cct #: 400
Post
Ref.
BALANCE
Debit
Credit
Debit
Credit
41,800.00
Balance Forward
1 5-Sep
J15
558.25
42,358.25
LEDGER
Date
2007
1 5-Sep
Item
Post
Ref.
A cct #: 599
BALANCE
Debit
Credit
Debit
Credit
3.00
Balance Forward
J15
1.00
2.00
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Objective 9.2: Establish

and account for a
Petty Cash Fund.
Cash is called liquid for a
good reason. It flows easily
and must be protected
carefully by firms.
However small or petty,
theft of petty cash over time
can seriously damage an
unsuspecting firm.
O9.2
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15
Establish Petty Cash

THOMPSON'S EQUIPMENT
BALANCE SHEET
As of 12/31/07
ASSETS
Cash
Petty Cash
Accounts Receivable
Inventory
Supplies
Current assets
Equipment
Total
O9.2
55,750
0
88,000
125,600
1,200
270,550
75,400
616,500
LIABILITIES
Accounts Payable
Current liabilities
Notes Payable
Total
166,700
166,700
185,000
351,700
EQUITY
Owner, Capital
Total
264,800
616,500
The Chart of
Accounts is modified
to include a new
ledger account
Petty Cash
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THOMPSON'S EQUIPMENT
BALANCE SHEET
As of 12/31/07
ASSETS
Cash
Petty Cash
Accounts Receivable
Inventory
Supplies
Current assets
Equipment
Total
55,500
250
88,000
125,600
1,200
270,550
75,400
616,500
LIABILITIES
Accounts Payable
Current liabilities
Notes Payable
Total
166,700
166,700
185,000
351,700
EQUITY
Owner, Capital
Total
264,800
616,500
A journal entry
moves the petty
cash amount from
Cash to Petty
Cash
O9.2
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GENERAL JOURNAL
Date
Description
14-Sep
PR
Petty Cash
Page 15
Debit
110
Cash
Credit
250.00
100
250.00
Establish Petty Cash Fund

LEDGER
Account Nam e: CASH
Date
2007
Item
Balance Forward
1 4-Sep
Acct #: 100
Post
Ref.
BALANCE
Debit
Credit
J15
1 4-Sep
O9.2
Item
Credit
55 ,7 5 0.00
LEDGER
25 0.00 55,500.00
Account Nam e: PET T Y CASH

Date
2007
Debit
Post
Ref.
J15
A cct #: 110
BALANCE
Debit
250.00
Credit
Debit
Credit
25 0.00
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Petty Cash Controls

Petty Cash Officer has individual responsibility for Petty
Cash.
Require vouchers for disbursement of petty cash.
Vouchers signed by Petty Cash Officer and the
individual in the firm receiving the cash.
The Petty Cash Officer not allowed to receive
disbursements without second signature.
The Petty Cash Officer doesnt record the
reimbursement of petty cash in the accounting system.
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At any point in
time the total
of the cash
count plus
vouchers in
the petty cash
drawer should
equal the
total in the
Petty Cash
Fund.
Petty Cash
Equation
PettyCashDrawer
Petty Cash
Vouchers
Total of the established

Petty Cash Fund
O9.2
(Assumes no decrease or increase in cash

due to error or theft.)
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Petty Cash Voucher

-Example
PETTYCASH
CASHVOUCHER
VOUCHER
PETTY
No.
No.
44
Paidto:
to: Western
WesternOffice
OfficeSupplies
Supplies
Paid
For:
For:
Printercartridges
cartridges
Printer
Account: Office
OfficeSupplies
Supplies
Account:
Approvedby
by
Approved
Cass Elliot
Elliot
Cass
Date:9-15-07
Date:9-15-07
$$
31.25
31.25
Cashreceived
receivedby
by
Cash
MervinPurvis
Purvis
Mervin
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Petty Cash
Reimbursement
Petty Cash fund:
$250:
Vouchers:
9/14 Paid
9/15 Paid
9/20 Paid
9/24 Paid
$111 for postage

$25 for delivery services
$87 for office supplies
$6 for key duplication
21
Petty Cash
Vouchers
Vouchers total $229. Total cash count on 9/30 is $20

Using the equation, vouchers + cash count should equal
$250, however,
$229
20
$249
Therefore, cash is short $1 and the Cash Short and Over
account will be used to record this loss (debit). Journal
entries follow. . .
O9.2
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Journalize Reimbursement of Petty Cash

GENERAL JOURNAL
Date
Description
PR
30-Sep Postage Expense
Page 15
Debit
Credit
570
111.00
Miscellaneous Expense
580
25.00
Supplies
160
87.00
580
6.00
Cash Short & Over
580
1.00
Cash
230.00
LEDGER
Account Nam e: CASH
Date
2007
Item
Acct #: 100
Post
Ref.
BALANCE
Debit
Credit
J15
LEDGER
230.00 17 ,37 0.00
Account Nam e: SUPPLIES

Date
2007
O9.2
30-Sep
Item
Credit
17 ,600.00
Balance Forward
30-Sep
Debit
A cct #: 160
Post
Ref.
BALANCE
Debit
Credit
Debit
Credit
57 5.00
Balance Forward
J15
87 .00
662.00
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GENERAL JOURNAL
Date
Description
Page 15
Debit
PR
Credit
570
111.00
580
25.00
Supplies
160
87.00
580
6.00
Cash Short & Over
580
1.00
LEDGER
Cash
230.00
Account Nam e: POST AGE EXPENSE

Date
2007
Item
Post
Ref.
A cct #: 570
BALANCE
Debit
Credit
J15
LEDGER
111.00
47 9.00
Account Nam e: MISCELLANEOUS EXPENSE

Date
2007
30-Sep
O9.2
Item
Credit
368.00
Balance Forward
30-Sep
Debit
Post
Ref.
Acct #: 580
BALANCE
Debit
Credit
Debit
Credit
118.00
Balance Forward
J15
25.00
143.00
J15
6.00
149.00
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GENERAL JOURNAL
Date
Description
Page 15
Debit
PR
Credit
570
111.00
580
25.00
Supplies
160
87.00
580
6.00
Cash Short & Over
580
1.00
Cash
230.00
LEDGER

Date
2007
30-Sep
O9.2
Post
Ref.
Item
A cct #: 599
BALANCE
Debit
Credit
Debit
Credit
3.00
Balance Forward
J15
1.00
4.00
The Cash Short and Over account

is used to balance the entry. If a
credit entry is required in Cash
Short and Over, a gain is
indicated.
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Objective 9.3:
Describe the use of
commercial banking services
for cash transactions
O9.3
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26
Bank Services involving

cash transactions
Deposit Products-checking and savings
Payroll tax deposit services
Electronic funds transfers
Cash management
Online banking
O9.3
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27
Payment Process Using

Checks
PAY TO THE ORDER OF
COAST NATIONAL BANK
Restrictive Endorsement
Should be used to limit the
ability of third parties to cash
the check.
FOR DEPOSIT ONLY
Penny & Lee Espresso
Show me
the
money!
______CHECK
______CHECK
______________
DRAWER
O9.3
______________
PAYEE
DRAWEE
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Who is keeping track of

the cash?
Firms that use bank checking
deposit services actually have two
parties that keep track of the firms
cash balances
1)the firm itself and, 2)the firms
bank.
O9.3
As a result, the firm must regularly

compare the two balances and
confirm any reasons for differences.
This process is called reconciliation
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Bank Reconciliation
BankCashBalance
LedgerCashBalance
ActualCashBalance
O9.3
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30
Why is there a difference?

??
Account #:
3489723 Checking Statement -Page 1
COAST NATIONAL BANK
Account #:
COAST NATIONAL BANK
VALLEYWOOD, CA 90090 (310) 333-4444
9/ 1/ 07 to 9/ 30/ 07
Activity
VALLEYWOOD, CA 90090 (310) 333-4444
9/ 1/ 07 to 9/ 30/ 07
Activity
Beginning balance:
16,543.77 Deposits:
25,274.65
Beginning balance:
16,543.77 Deposits:
25,274.65
123 Latte Drive
Net activity
840.98 Withdrawals: 24,934.17
123 Latte Drive
Net activity
840.98 Withdraw als: 24,934.17
Valleywood, CA 90090
Ending balance:
17,384.75 Other Dr & Cr:
500.50 Cr
Valleywood, CA 90090
Ending balance:
17,384.75 Other Dr & Cr:
500.50 Cr
Date
Checks & Other Debits Deposits & Other CreditsBalance
Explanation
Date
Explanation
Ck No.
Amount
Amount
16,543.77
Ck No.
Amount
Amount
16,543.77
1-Sep
1105
36.34
16,507.43
1-Sep
1105
36.34
16,507.43
3-Sep
1106
1,236.44 Deposit
11,200.40 26,471.39
3-Sep
1106
1,236.44 Deposit
11,200.40 26,471.39
3-Sep
856.50
25,614.89 NSF 8/ 25 deposit item
3-Sep
856.50
6-Sep
1107
2,358.94
23,255.95
6-Sep
1107
2,358.94
23,255.95
7-Sep
1108
112.00
23,143.95
7-Sep
1108LEDGER112.00
23,143.95
8-Sep
100.00 23,243.95 Error 8/ 25 deposit
8-Sep
100.00 23,243.95 Error 8/ 25 deposit
12-Sep
1109
3,467.32
19,776.63
Account Nam e: CASH 12-Sep
Acct #: 100 19,776.63
1109
3,467.32
12-Sep
1111
12.60
19,764.03
12-Sep
1111
12.60
19,764.03
BALANCE
15-Sep
1112
345.00
19,419.03
15-Sep Post
1112
345.00
19,419.03
16-Sep
Deposit
8,674.25
28,093.28
Debit
Credit
Date
Item 16-Sep Ref.
Debit
Credit
Deposit
8,674.25
28,093.28
19-Sep
1114
12,679.75
15,413.53
19-Sep
1114
12,679.75
9/30/07 Balance Forward
18,063.02 15,413.53
21-Sep
1115
75.33
15,338.20
21-Sep
1115
75.33
15,338.20
22-Sep
1,256.00 16,594.20 Collection 7/ 24 deposit item
22-Sep
22-Sep
1116
4,610.45
11,983.75
22-Sep
1116
4,610.45
11,983.75
26-Sep
Deposit
5,400.00 17,383.75
26-Sep
Deposit
5,400.00 17,383.75
30-Sep
27.50 17,411.25 Interest earned on deposits
30-Sep
30-Sep
26.50
17,384.75 Bank service fee -checking
30-Sep
26.50
Ending balance:
17,384.75
Ending balance:
17,384.75
O9.3
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Why is there a difference?

The firms
firms cash
cash balance
balance (book
(book or
or
The
ledger balance);
balance); and
and the
the banks
banks cash
cash
ledger
balance are
are usually
usually not
not the
the same
same
balance
due to
to timing
timing differences.
differences.
due
The firm
firm makes
makes changes
changes to
to its
its cash
cash
The
balance that
that will
will take
take some
some time
time to
to
balance
reach the
the bank
bank and;
and;
reach
O9.3
The bank
bank make
make changes
changes to
to the
the
The
firms deposit
deposit balances
balances that
that take
take
firms
some time
time to
to reach
reach the
the firm
firm
some
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The Firm
What changes does

the firm initiate?
32
The firm
firm records:
records:
The
Checks issued
issued -credit
-credit to
to cash
cash
Checks
Cash received
received for
for deposit
deposit -debit
-debit to
to
Cash
cash
cash
Until the
the bank
bank receives
receives this
this
Until
information these
these changes
changes are
are called:
called:
information
Outstanding checks
checks
Outstanding
Deposits
Deposits in
in transit
transit
O9.3
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What changes* does the

bank initiate?
33
The bank
bank may
may add
add to
to the
the cash
cash balance
balance
The
for:
for:
Electronic funds
funds transferred
transferred in
in
Electronic
Interest paid
paid for
for deposit
deposit balances
balances
Interest
Collection of
of notes
notes and
and NSF
NSF checks
checks
Collection
The bank
bank may
may deduct
deduct cash
cash for:
for:
The
Service fees
fees
Service
Returned NSF
NSF checks
checks previously
previously
Returned
deposited
O9.3deposited
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Bank
Reconciliatio
n
Adjustments
to the Bank
and the
Ledger
Balance
Must result
in the same
adjusted
cash balance
to reconcile.
Checking Statement -Page 1
Account #:
COAST NATIONAL BANK
Account #:
COAST NATIONAL BANK
VALLEYWOOD, CA 90090 (310) 333-4444
9/ 1/ 07 to 9/ 30/ 07
Activity
VALLEYWOOD, CA 90090 (310) 333-4444
9/ 1/ 07 to 9/ 30/ 07
Activity
Beginning balance:
16,543.77 Deposits:
25,274.65
Beginning balance:
16,543.77 Deposits:
25,274.65
123 Latte Drive
Net activity
840.98 Withdrawals: 24,934.17
123 Latte Drive
Net activity
840.98 Withdrawals: 24,934.17
Valleyw ood, CA 90090
Ending balance:
17,384.75 Other Dr & Cr:
500.50 Cr
Valleyw ood, CA 90090
Ending balance:
17,384.75 Other Dr & Cr:
500.50 Cr
Date
Explanation
Date
Explanation
Ck No.
Amount
Amount
16,543.77
Ck No.
Amount
Amount
16,543.77
1-Sep
1105
36.34
16,507.43
1-Sep
1105
36.34
16,507.43
3-Sep
1106
1,236.44 Deposit
11,200.40 26,471.39
3-Sep
1106
1,236.44 Deposit
11,200.40 26,471.39
3-Sep
856.50
3-Sep
856.50
6-Sep
1107
2,358.94
23,255.95
6-Sep
1107
2,358.94
23,255.95
7-Sep
1108
112.00
23,143.95
7-Sep
1108
112.00
23,143.95
8-Sep
100.00 23,243.95 Error 8/ 25 deposit
8-Sep
100.00 23,243.95 Error 8/ 25 deposit
12-Sep
1109
3,467.32
19,776.63
12-Sep
1109
3,467.32
19,776.63
12-Sep
1111
12.60
19,764.03
12-Sep
1111
12.60
19,764.03
15-Sep
1112
345.00
19,419.03
15-Sep
1112
345.00
19,419.03
16-Sep
Deposit
8,674.25 28,093.28
16-Sep
Deposit
8,674.25 28,093.28
19-Sep
1114
12,679.75
15,413.53
19-Sep
1114
12,679.75
15,413.53
21-Sep
1115
75.33
15,338.20
21-Sep
1115
75.33
15,338.20
22-Sep
22-Sep
22-Sep
1116
4,610.45
11,983.75
22-Sep
1116
4,610.45
11,983.75
26-Sep
Deposit
5,400.00 17,383.75
26-Sep
Deposit
5,400.00 17,383.75
30-Sep
30-Sep
30-Sep
26.50
30-Sep
26.50
Ending balance:
17,384.75
Ending balance:
17,384.75
BANK STATEMENT RECONCILIATION

A review of the checks issued by the firm indicates Ck #1110 for $323.00 and #1113
for $86.23 are outstanding and a 9/30 deposit of $1,488.00 has not been received by
the bank. The deposit error was made by the bank.
Bank Statement Balance
Statement ending balance
Add:
Deposits in transit
Deduct:
Checks outstanding
O9.3
34
Adjusted balance:
17,384.75
1,488.00
409.23
18,463.52
Ledger Balance
As of statement date
Add:
NSF collected
Interest earned
Deduct:
Returned deposit -NSF
Service fee
Adjusted balance
18,063.02
1,256.00
27.50
856.50
26.50
18,463.52
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35
Journalize
adjustments
All of the
adjustments
to the ledger
cash balance
must be
formally
entered into
the
accounting
system to
complete the
bank
reconciliation
LEDGER
Account Nam e: INT EREST INCOME
Date
2007
Item
BALANCE
Post
Ref.
Debit
Credit
Debit
Credit
89.55
Balance Forward
6-Oct
J9
27 .50
117 .05
LEDGER
Account Nam e: MISCELLANEOUS EXPENSE
Date
2007
6-Oct
O9.3
A cct #: 450
Item
Post
Ref.
Acct #: 5 80
BALANCE
Debit
Credit
Debit
Credit
268.00
Balance Forward
J9
26.50
294.50
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36
Journalize
Adjustments
When this
posting is
complete,
the resulting
cash balance
should
reflect all
the
information
to date as to
the true
cash balance
LEDGER
Account Nam e: CASH
Date
2007
Item
A cct #: 100
Post
Ref.
BALANCE
Debit
Debit
Credit
18,063.02
Balance Forward
6-Oct
J9
1,283.50
LEDGER
19,346.5 2
883.00
Account Nam e: T . Sim , RECEIVABLE

Date
2007
Item
Post
Ref.
18,463.5 2
A cct #: 175 .6
BALANCE
Debit
Credit
J9
LEDGER
856.50
6-Oct
O9.3
Item
Credit
856.50
Account Nam e: B. Pal, RECEIVABLE

Date
2007
Debit
0.00
Balance Forward
6-Oct
Credit
Post
Ref.
A cct #: 175.9
BALANCE
Debit
Credit
Debit
Credit
1,256.00
Balance Forward
J9
1,256.00
0.00
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37
Objective 9.4:
Analysis: Compute and

explain liquidity measures,
the doomsday ratio and
the quick or acid test
ratio.
O9.4
CourseCollege.com
38
Objective 9.4:
Analysis: Compute and explain the
doomsday ratio and the quick or acid
test ratio
Cash + cash
equivalents
Cash + Short
term
Investments +
Accounts &
Notes
Receivable
O9.4
Current
Liabilities
Doomsday
ratio
Current
Liabilities
Quick ratio
CourseCollege.com
39
Doomsday ratio
The doomsday ratio answers the following question:
If this business ceased to exist, what portion of current
liabilities could be paid by just using existing cash
available?
The doomsday
ratio deals with a
worst case
scenario.
Cash
Current
Liabilities
O9.4
Doomesda
y
Ratio
CourseCollege.com
40
Doomsday Ratio Example

RAMOS Distributors
BALANCE SHEET
As of 12/31/07
ASSETS
Cash
Accounts Receivable
Inventory
Supplies
Current assets
Equipment
Total
25,600
56,700
98,200
2,100
182,600
121,000
486,200
LIABILITIES
Accounts Payable
Current liabilities
Notes Payable
Total
165,700
165,700
36,750
202,450
EQUITY
Owner, Capital
Total
283,750
486,200
15% of current
liabilities could be
paid with cash
available
Doomesday ratio
Dratio
O9.4
Cash / Current liabilities

0.15
.15
?
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41
Quick ratio
The quick ratio answers the following question:
How many dollars of cash, short term investments,
accounts and notes receivable are available to pay
current assets?
Cash + Short
term
Investments +
Accounts &
Notes
Receivable
O9.4
Notice Inventory
is not included
Current
Liabilities
Quick
Ratio
CourseCollege.com
42
Quick Ratio Example

BALANCE SHEET
As of 12/31/07
ASSETS
Cash
Accounts Receivable
Inventory
Supplies
Current assets
Equipment
Total
25,600
56,700
98,200
2,100
182,600
121,000
486,200
LIABILITIES
Accounts Payable
Current liabilities
Notes Payable
Total
165,700
165,700
36,750
202,450
EQUITY
Owner, Capital
Total
283,750
486,200
50% of current liabilities could

be paid without relying on
Inventory or Supplies
Quick ratio
Quick ratio =
O9.4
Cash + AR / Current Liabilities
.50
?0.50
CourseCollege.com
43
End Unit 9
CourseCollege.com

9 Cash

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1

1. Establish and account for a Change

Cash and Cash

Cash and Cash

Establish Change Fund

Establish Change Fund

Establish Change Fund

Establish Change Fund

Account Nam e: CHANGE FUND

Change Fund Equation

Register Tape Sales

Ending Cash Count

Change Fund Example

Using the equation, beginning change fund + register

Change Fund Problem

Journalize the days cash revenue

Cash Short & Over

The cash count

Objective 9.2: Establish

Establish Petty Cash

Establish Petty Cash

Establish Petty Cash

Establish Petty Cash Fund

Account Nam e: PET T Y CASH

Petty Cash Controls

Total of the established

(Assumes no decrease or increase in cash

Petty Cash Voucher

$111 for postage

Vouchers total $229. Total cash count on 9/30 is $20

Journalize Reimbursement of Petty Cash

30-Sep Postage Expense

Cash Short & Over

Account Nam e: CASH

230.00 17 ,37 0.00

Account Nam e: SUPPLIES

Journalize Reimbursement of Petty Cash

30-Sep Postage Expense

Cash Short & Over

Account Nam e: POST AGE EXPENSE

Account Nam e: MISCELLANEOUS EXPENSE

Journalize Reimbursement of Petty Cash

30-Sep Postage Expense

Cash Short & Over

Account Nam e: CASH SHORT & OVER

The Cash Short and Over account

Bank Services involving

Payment Process Using

COAST NATIONAL BANK

FOR DEPOSIT ONLY

Penny & Lee Espresso

Who is keeping track of

As a result, the firm must regularly

Why is there a difference?

Why is there a difference?

What changes does

What changes* does the

BANK STATEMENT RECONCILIATION

Account Nam e: T . Sim , RECEIVABLE

Account Nam e: B. Pal, RECEIVABLE

Analysis: Compute and

Doomsday Ratio Example

Cash / Current liabilities