BSB110 Lecture Notes - Lecture 8: Bank Reconciliation, Cash Cash, Bank Statement
Week 8 Accounting Lecture Notes
Cash- Part 1
Effects of major accounting transactions on cash
Credit and electronic banking
• Many business transactions now utilise electronic payment methods.
• Credit cards are a common form of payment for goods and services.
• EFTPOS and credit card transactions provide benefits to businesses due to reduction
in staff costs and less risk associated with cash handling.
• Electronic funds transfer – provides nearly instant payment and reduces
transactional costs.
Safeguarding and managing cash
• Cash is the most desirable asset because it is readily convertible into any other asset.
• Cash consists of:
o cash on hand (notes and coins)
o cash at bank
o cheque accounts
o cash equivalents (bank
overdrafts, deposits on
money market, 90-day
bank acceptance bills)
Internal control over cash
1. Internal control over cash receipts:
find more resources at oneclass.com
find more resources at oneclass.com
2. Internal control over cash payments
Bank reconciliation
• The use of a bank contributes significantly to good internal control over cash by:
o Minimising the amount of cash that must be kept on hand.
o Providing a double record of all bank transactions:
▪ one by the business
▪ one by the bank.
• Helping a company safeguard its cash by using a bank as a depository and
clearinghouse for cheques received and written.
Key terms in bank reconciliation process
• Deposits in transit = the Business has recorded money received in the cash receipts
journal (CRJ) but the bank has not (eg money deposited overnight in bank night safe
• Unpresented cheque = a cheque issued / written by the Business and recorded in the
cash payments journal (CPJ), but the person who receives the cheque (ie. the payee)
has not yet presented the cheque to the bank
• Dishonoured cheque – oued heues ae peiously eoded ash eeipts that
ustoe didt hae eough oey i aout to oe
Bank reconciliation
• ‘eoilig the ak aout ioles opaig the aks eods ad the fis
bank ledger account.
• Lak of ageeet etee fis ooks ad ak stateet a esult fo to
main reasons:
o Timing differences
o Errors
• Timing differences occur when the parties record the same transaction in different
periods:
o Unpresented Cheque – lag between when the cheque is written and dated
and the date it is paid by the bank.
o Outstanding deposits – lag between when receipts are recorded by the
business and when recorded by the bank.
• Errors by either party in recording transactions
find more resources at oneclass.com
find more resources at oneclass.com
The reconciliation procedure
• The Bak Stateet is fo the aks pespetie. This is the opposite ie to the
business (us)
• If a credit balance on the bank statement:
o Baks ie, a liaility to the C
o Busiesss ie, a asset to usD
• If a debit balance on the bank statement:
o Baks ie, a asset to the as ustoe oes ak D
o Busiesss ie, a liaility hee e oe ak C
What is the formal of a bank reconciliation?
find more resources at oneclass.com
find more resources at oneclass.com
Document Summary
Internal control over cash: internal control over cash receipts, internal control over cash payments. The reconciliation procedure: the ba(cid:374)k state(cid:373)e(cid:374)t is f(cid:396)o(cid:373) the (cid:271)a(cid:374)k(cid:859)s pe(cid:396)spe(cid:272)ti(cid:448)e. this is the opposite (cid:448)ie(cid:449) to the business (us) If a credit balance on the bank statement: ba(cid:374)k(cid:859)s (cid:448)ie(cid:449), a lia(cid:271)ility to the(cid:373) (cid:894)c(cid:396)(cid:895, busi(cid:374)ess(cid:859)s (cid:448)ie(cid:449), a(cid:374) asset to us(cid:894)d(cid:396)(cid:895) If a debit balance on the bank statement: ba(cid:374)k(cid:859)s (cid:448)ie(cid:449), a(cid:374) asset to the(cid:373) as (cid:272)usto(cid:373)e(cid:396) o(cid:449)es (cid:271)a(cid:374)k (cid:894)d(cid:396)(cid:895, busi(cid:374)ess(cid:859)s (cid:448)ie(cid:449), a lia(cid:271)ility (cid:449)he(cid:396)e (cid:449)e o(cid:449)e (cid:271)a(cid:374)k (cid:894)c(cid:396)(cid:895) Adjusted bank balance should equal the balance of the cash at bank account. Illustrated example: the bank reconciliation illustrated for justco pty ltd (page 415-419 of the text). Managing and monitoring cash: operating cycle of a retail business, basic principles of cash management: Accounting for receivables: accounts receivable are generally the most significant receivables for most firms, 3 accounting issues associated with accounts receivable are, recognising accounts receivable, valuing accounts receivable, accelerating cash receipts from receivables.
