CPA 13

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School

Indiana Institute of Technology *

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Course

1010

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Accounting

Date

Apr 3, 2024

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docx

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Uploaded by GrandCrane4099

Class Preparation Assignment (CPA) ACC1010 – Accounting Principles Chapter 8 – Internal Control and Cash CPA #13 READ : Pages 443 - 451 QUESTIONS : 1. What is a bank reconciliation? a. A bank reconciliation is a document explaining the reasons for the difference between a depositor’s cash records and the depositor’s cash balance in its bank account. 2. What are some timing differences that cause a book balance and bank balance to be different? a. Some timing differences that cause a book balance and bank balance to be different are as follows: i. When a business writes a check, it immediately deducts the amount from its checkbook and Cash account. The bank, however, does not subtract the check from the company’s account until the bank pays the check a few days later. ii. When a company deposits cash in its account, it immediately adds the cash receipt to the checkbook and Cash account. The bank, however, may take a day or two to add deposits to the company’s balance. iii. EFT cash payments and EFT cash receipts are often recorded by the bank before a company learns of them. 3. What are the reconciling items that appear on the bank side of the bank reconciliation? a. Deposits in Transit b. Outstanding Checks c. Bank Errors 4. What are the reconciling items that appear on the book side of the bank reconciliation? a. Bank Collections b. EFT c. Service Charges d. Interest Revenue on a Checking Account e. NSF Checks 5. REVIEW CAREFULLY Exhibit 8-7 on page 448. a. I reviewed Exhibit 8-7

Class Preparation Assignment (CPA) 6. Which items require journal entries? WHY? a. All items on the book side of the bank reconciliation require journal entries. This is because these transactions have yet to be recorded in the company’s journal. The bank side of the reconciliation does not require journal entries because they have already been journalized. PROBLEMS: Homework Assignments #2a and #2b Answers 2a: A) The missing characteristics that are missing in this situation are the monitoring of controls and information systems. Due to an internal auditor/accountant overseeing the changes being made, the programmers may have not been following the legal guidelines for the accounting/information system being altered. A way this can be solved is to have an internal auditor oversee the process of re-programming the accounting system. B) The missing characteristic in this situation is the monitoring of controls. Ms. Rottler trusts her employee with all assets of her company with no supervision. With her buying multiple luxurious items with such a low income it is obvious she is stealing from the company. What Ms. Rottler should do is hire an external auditor to make sure her employee is following company policy and not stealing from the company. C) This situation is missing the characteristic of risk assessment. Izzie thought that falsifying records to make the company more appealing would not come with some risk. What Izzie should have done is be truthful about the company's records and worked to achieve the loan. D) The missing characteristic in this situation is the environment. Because the owner made a mistake, he acted like it was okay and lied that he never used receipt numbers before. This sets a bad example to the employees in the company that it is okay to lie about your mistakes. E) This situation is missing the characteristic of risk assessment. In order to make the company thrive and reduce expenses, the manager ceases the purchasing of fidelity bonds on the cashiers. This can potentially cause great risk for the employee in the future. To solve this, what the manager could do is try to reduce expenses another way rather than harming his employees’ benefits. F) The environment is the missing characteristic in this situation. The owner is setting a bad example to the employee by only taking the cash receipts into the bank on a certain day because a certain person is working. This should not be the case the cash receipts should be taken in regularly regardless who is working at

Class Preparation Assignment (CPA) the bank. 2b:

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