CHAPTER 6
Bank Accounts and Cash Funds
DISCUSSION QUESTIONS
Suggested Responses
1.
The signature card provides the bank with a copy of the official signature(s) of the
person or persons authorized to sign checks. The bank can use it to verify signatures
on any checks issued by the depositor.
2.
A check must be endorsed when deposited in a bank, because the bank must have
legal title to it in order to collect payment from the drawer of the check (the person
or firm who wrote the check).
3.
There is generally a difference between the balance in the Cash account on the company’s
books and the balance on the bank statement because of deposits in transit (deposits made
but not in time for the current bank statement), outstanding checks (checks that you have
written, but the bank has not yet honored or paid out), bank errors, bank credit memos,
bank debit memos, or checkbook errors.
4.
a.
b.
c.
5.
It is necessary to make general journal entries for the ledger balance side of a bank
reconciliation because the customer just learned from the statement about new
transactions, such as bank service charges, that are not yet reflected in the books.
6.
a.
A Petty Cash Fund provides an efficient way for small immediate cash payments
to be made instead of writing checks.
b.
The entry to establish the fund is a debit to Petty Cash Fund for $50, and a credit
to Cash for $50. The entry to reimburse the fund is a debit to each account that
petty cash funds were made for and a credit to Cash.
a.
A debit balance in Cash Short and Over means there is a net shortage of cash.
b.
A debit balance appears on the income statement under Miscellaneous Expense.
c.
A credit balance in Cash Short and Over represents a net overage of cash.
d.
A credit balance appears on the income statement under Miscellaneous Income.
7.
2
3
4
d.
e.
3
2
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269
CHAPTER 6
Bank Accounts and Cash Funds
SOLUTIONS TO EXERCISES
Exercise 6-1
$3,764.00
Bank Statement Balance
Add:
Deposit in transit
(a)
Deduct: Outstanding checks
No. 211
No. 225
No. 228
Adjusted Bank Statement Balance
(b)
$212.00
320.00
318.00
(c)
850.00
$3,181.00
(d)
$2,837.00
430.00
$3,267.00
(f)
86.00
$3,181.00
Ledger Balance of Cash
Add:
Note collected by bank
Deduct: Bank service and collection charges
NSF check from customer
Adjusted Ledger Balance of Cash
(e)
267.00
$4,031.00
$ 12.00
74.00
Exercise 6-2
GENERAL JOURNAL
DATE
1
2
20-July
3
4
5
6
DESCRIPTION
POST.
REF.
PAGE
DEBIT
CREDIT
1
31 Cash
Notes Receivable
Interest income
Collected principal and interest
on note from D. Dansky.
717.50
31 Cash
Accounts Payable
Error in recording Ck. No. 2225
in checkbook payable to Denton
Company.
12.00
2
700.00
17.50
3
4
5
6
7
7
8
9
10
11
12
8
12.00
9
10
11
12
13
13
14
15
16
17
31 Accounts Receivable
Cash
NSF check received from
J. Kenyon.
95.00
31 Miscellaneous Expense
Cash
Bank service and collection
charges.
29.00
14
95.00
15
16
17
18
18
19
20
21
22
23
19
29.00
20
21
22
23
270
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CHAPTER 6
Bank Accounts and Cash Funds
Exercise 6-3
Bank Statement Balance
Add:
Deposit in transit
Deduct: Outstanding checks
Adjusted Bank Statement Balance
$3,600
1,500
$5,100
2,600
($5,100 – $2,500)
$2,500
Exercise 6-4
ITEM
a.
A check-printing charge
b.
An outstanding check
c.
A deposit for $197 listed
incorrectly on the bank statement as $179
d.
e.
ADD
TO
BANK
STATEMENT
BALANCE
SUBTRACT
FROM
BANK
STATEMENT
BALANCE
ADD
TO
LEDGER
BALANCE
OF CASH
SUBTRACT
FROM
LEDGER
BALANCE
OF CASH
9
9
9
A collection charge the bank
made for a note it collected for
its depositor
9
A check written for $41.73
and recorded incorrectly in the
checkbook as $41.37
9
f.
A deposit in transit
g.
An NSF check received from
a customer
h.
A check written for $82.40
and recorded incorrectly in the
checkbook as $820.40
9
9
9
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271
CHAPTER 6
Bank Accounts and Cash Funds
Exercise 6-5
Hosung Company
Bank Reconciliation
August 31, 20—
$1,383.00
237.25
Bank Statement Balance
Add:
Error in recording check
$1,620.25
Deduct:
Outstanding checks
$260.50
425.10
331.00
1,016.60
Adjusted Bank Statement Balance
$ 603.65
Ledger Balance of Cash
Add:
$ 801.65
Deduct:
NSF check
Bank service and collection charges
Adjusted Ledger Balance of Cash
272
$180.00
18.00
198.00
$ 603.65
© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.
CHAPTER 6
Bank Accounts and Cash Funds
Exercise 6-6
GENERAL JOURNAL
DATE
1
a.
2
3
4
DESCRIPTION
Petty Cash Fund
Cash
Established a Petty Cash Fund,
Ck. No. 857.
POST.
REF.
PAGE
DEBIT
CREDIT
100.00
1
100.00
3
4
5
6
5
b.
7
8
9
10
11
Store Supplies Expense
Office Supplies Expense
Miscellaneous Expense
Cash
Reimbursed the Petty Cash
Fund, Ck. No. 889.
38.00
21.00
39.00
Petty Cash Fund
Cash
Increased the amount of the
Petty Cash Fund, Ck. No. 891.
50.00
Store Supplies Expense
Delivery Expense
Miscellaneous Expense
Cash
Reimbursed the Petty Cash
Fund, Ck. No. 936.
41.68
35.00
19.90
6
7
8
98.00
11
12
c.
14
15
16
13
50.00
19
20
21
22
23
14
15
16
17
18
9
10
12
13
2
17
d.
18
19
20
96.58
22
23
24
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21
24
273
CHAPTER 6
Bank Accounts and Cash Funds
Exercise 6-7
GENERAL JOURNAL
DATE
DESCRIPTION
Cash
Cash Short and Over
Income from Services
To record revenue earned
during the day involving a cash
shortage of $2.55.
1
2
3
4
5
6
PAGE
POST.
REF.
DEBIT
CREDIT
878.85
2.55
1
2
881.40
7
3
4
5
6
7
Exercise 6-8
274
a.
On January 3, the cash register tape showed that sales were $1,520, whereas the
cash count, after deducting the Change Fund, was $1,522. This means that there
was a $2 overage. On January 4, the cash register tape showed that sales were
$1,421, whereas the cash count, after deducting the Change Fund, was $1,418.
This means that there was a $3 shortage. On January 6, the cash register tape
showed that sales were $1,665, whereas the cash count, after deducting the
Change Fund, was $1,664. This means that there was a $1 shortage.
b.
On the income statement, the $2 debit balance of Cash Short and Over is added
to the debit balance of Miscellaneous Expense. (Credit Cash Short and Over,
debit Miscellaneous Expense.)
© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.
CHAPTER 6
Bank Accounts and Cash Funds
Problem 6-1A
Arthur's Men's Shop
Bank Reconciliation
November 30, 20—
$2,784.77
945.00
Bank Statement Balance
Add:
Deposit in transit (November 30)
$3,729.77
Deduct: Outstanding checks
No. 1420
No. 1500
No. 1517
No. 1518
No. 1519
Adjusted Bank Statement Balance
$125.87
155.00
132.00
218.00
128.85
759.72
$2,970.05
$2,375.05
Ledger Balance of Cash
Add:
Error in recording Check No. 1487
payable to M. A. Golden for personal use
Note collected (principal $600, interest
$15, C. G. Tolson)
$
9.00
615.00
624.00
Deduct: Bank service and collection charges
$2,999.05
29.00
Adjusted Ledger Balance of Cash
$2,970.05
GENERAL JOURNAL
DATE
1
2
3
4
20-Nov.
DESCRIPTION
PAGE
POST.
REF.
DEBIT
CREDIT
1
30 Cash
M. A. Golden, Drawing
Error in recording Check No. 1487.
9.00
2
9.00
4
5
6
7
8
9
10
5
30 Cash
Notes Receivable
Interest Income
Bank collected note signed
by C. G. Tolson.
615.00
6
600.00
15.00
13
14
15
7
8
9
10
11
12
3
11
30 Miscellaneous Expense
Cash
Bank service and collection
charges.
29.00
12
29.00
14
15
16
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13
16
275
CHAPTER 6
Bank Accounts and Cash Funds
Problem 6-2A
GENERAL JOURNAL
DATE
1
2
20-May
3
4
5
DESCRIPTION
PAGE
POST.
REF.
DEBIT
CREDIT
1
1 Petty Cash Fund
Cash
Established Petty Cash Fund,
Ck. No. 956.
150.00
2
150.00
3
4
5
6
6
31 Office Supplies Expense
Delivery Expense
Miscellaneous Expense
B. Ellsworth, Drawing
Cash
Reimbursed Petty Cash Fund,
Ck. No. 1098.
7
8
9
10
11
12
13
11.59
15.00
44.09
25.00
7
8
9
10
95.68
11
12
13
14
14
15
15
16
16
17
17
18
18
19
19
20
20
21
21
22
22
23
23
24
24
25
25
26
26
27
27
28
28
29
29
30
30
31
31
32
32
33
33
34
34
35
35
36
36
37
37
276
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CHAPTER 6
Bank Accounts and Cash Funds
Problem 6-2A (concluded)
PETTY CASH PAYMENTS RECORD
PAGE
DISTRIBUTION OF PAYMENTS
VOUCHER
NO.
DATE
1
2
EXPLANATION
PAYMENTS
OFFICE
SUPPLIES
EXPENSE
DELIVERY
EXPENSE
MISC.
EXPENSE
OTHER ACCOUNTS
ACCOUNT
AMOUNT
20-May
1
1
Established fund,
2
Ck. No. 956, $150
3
3
4
3
1
Postage stamps
5
4
2
Taxi fare
12.00
6
6
3
Delivery charge
15.00
7
9
4
Withdrawal by
B. Ellsworth
8
8.80
4
12.00
5
15.00
6
B. Ellsworth,
25.00
Drawing
9
13
5
Postage
8.29
10
19
6
Pens for office
6.00
6.00
11
23
7
Box of staples
3.59
3.59
12
28
8
Clean windows
15.00
13
29
9
Pencils for office
14
31
Totals
8.80
7
25.00
8.29
9
10
11
15.00
2.00
2.00
95.68
11.59
8
12
13
15.00
44.09
25.00
14
15
15
16
16
17
Balance in Fund
18
Reimbursed Ck.
19
20
No. 1098
Total
$ 54.32
17
18
95.68
19
$150.00
20
21
21
22
22
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277
CHAPTER 6
Bank Accounts and Cash Funds
Problem 6-3A
GENERAL JOURNAL
DATE
1
2
20-July
3
4
5
6
7
DESCRIPTION
POST.
REF.
PAGE
DEBIT
CREDIT
1
28 Cash
Cash Short and Over
Income from Services
To record revenue earned
during the day involving a
cash shortage of $1.70.
893.50
1.70
2
3
895.20
4
5
6
7
8
8
9
10
11
12
13
14
29 Cash
Cash Short and Over
Income from Services
To record revenue earned
during the day involving a
cash shortage of $1.60.
975.80
1.60
30 Cash
Income from Services
Cash Short and Over
To record revenue earned
during the day involving a
cash overage of $2.10.
886.60
31 Cash
Cash Short and Over
Income from Services
To record revenue earned
during the day involving a
cash shortage of $2.85.
1,024.40
2.85
9
10
977.40
11
12
13
14
15
15
16
17
18
19
20
21
16
884.50
2.10
17
18
19
20
21
22
22
23
24
25
26
27
28
23
24
1,027.25
25
26
27
28
29
29
30
30
31
31
32
32
33
33
34
34
35
35
36
36
37
37
278
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CHAPTER 6
Bank Accounts and Cash Funds
Problem 6-4A
Baginski and Company
Bank Reconciliation
August 31, 20—
$1,323.00
599.00
Bank Statement Balance
Add:
Deposit in transit (August 31)
$1,922.00
Deduct:
Outstanding checks
No. 928
No. 929
Adjusted Bank Statement Balance
$150.00
292.00
442.00
$1,480.00
$1,563.00
Ledger Balance of Cash
Add:
Error in recording Check No. 925
27.00
payable to Jardin Company
$1,590.00
Deduct:
NSF check from L. Pitts
Bank service and collection charges
Adjusted Ledger Balance of Cash
$ 95.00
15.00
$1,480.00
GENERAL JOURNAL
DATE
1
2
3
4
5
20-Aug.
DESCRIPTION
110.00
PAGE
POST.
REF.
DEBIT
CREDIT
1
31 Cash
Accounts Payable
Error in recording Ck. No. 925
payable to Jardin Company.
27.00
31 Accounts Receivable
Cash
NSF check received from L. Pitts.
95.00
2
27.00
4
5
6
7
8
9
6
7
95.00
12
13
14
8
9
10
11
3
10
31 Miscellaneous Expense
Cash
Bank service and collection
charges.
15.00
11
15.00
13
14
15
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12
15
279
CHAPTER 6
Bank Accounts and Cash Funds
Problem 6-4A (concluded)
THIS FORM IS PROVIDED TO HELP YOU BALANCE
YOUR BANK STATEMENT
CHECKS OUTSTANDING—NOT
CHARGED TO ACCOUNT
No.
928
929
$
150.00
292.00
BEFORE YOU START
PLEASE BE SURE YOU HAVE ENTERED IN YOUR CHECKBOOK ALL AUTOMATIC TRANSACTIONS SHOWN ON
THE FRONT OF YOUR STATEMENT.
YOU SHOULD HAVE ADDED
YOU SHOULD HAVE SUB-
IF ANY OCCURRED:
TRACTED IF ANY OCCURRED:
1. Loan advances.
1. Automatic loan payments.
2. Credit memos.
2. Automatic savings transfers.
3. Other automatic deposits.
3. Service charges.
4. Debit memos.
5. Other automatic deductions
and payments.
BANK BALANCE SHOWN
ON THIS STATEMENT
$
1,323.00
(IF ANY)
$
599.00
TOTAL
$
1,922.00
CHECKS OUTSTANDING
$
442.00
BALANCE
$
1,480.00
ADD
DEPOSITS NOT SHOWN
ON THIS STATEMENT
SUBTRACT
SHOULD AGREE WITH YOUR CHECKBOOK BALANCE
TOTAL $
442.00
AFTER DEDUCTING SERVICE CHARGE (IF ANY)
SHOWN ON THIS STATEMENT.
Please examine immediately and report if incorrect. If no reply is received within 10 days, the account will be considered correct.
IN CASE OF ERRORS OR INQUIRIES ABOUT YOUR BILL
Send your inquiry in writing on a separate sheet so that the creditor receives it within 60 days after the bill was mailed to you.
Your written inquiry must include:
1. Your name and account number;
2. A description of the error and why (to the extent you can explain) you believe it is an error; and
3. The dollar amount of the suspected error.
If you have authorized your creditor to automatically pay your bill from your checking or savings account, you can stop or reverse payment on any amount you think is wrong by mailing your notice so that the creditor receives it within 11 days after the
bill was sent to you.
You remain obligated to pay the parts of your bill not in dispute, but you do not have to pay any amount in dispute during the
time the creditor is resolving the dispute. During that same time, the creditor may not take any action to collect disputed
amounts or report disputed amounts as delinquent.
This is a summary of your rights; a full statement of your rights and the creditor's responsibilities under the Federal Fair Credit
Billing Act will be sent to you both upon request and in response to a billing error notice.
280
© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.
CHAPTER 6
Bank Accounts and Cash Funds
Problem 6-1B
Merkle Company
Bank Reconciliation
November 30, 20—
$3,490.72
525.30
Bank Statement Balance
Add:
Deposit in transit (November 30)
$4,016.02
Deduct: Outstanding checks
No. 732
No. 743
No. 744
No. 745
No. 746
$145.34
42.00
16.20
119.00
35.26
357.80
Adjusted Bank Statement Balance
$3,658.22
Ledger Balance of Cash
Add:
Note collected (principal $600, interest
$3,219.72
607.50
$7.50, O. L. Leland)
$3,827.22
Deduct: Cash withdrawal by C. R. Merkle
Bank service and collection charges
$150.00
19.00
$3,658.22
Adjusted Ledger Balance of Cash
GENERAL JOURNAL
DATE
1
2
3
4
5
6
20-Nov.
169.00
DESCRIPTION
PAGE
POST.
REF.
DEBIT
CREDIT
1
30 Cash
Notes Receivable
Interest Income
Bank collected note signed
by O. L. Leland.
607.50
2
600.00
7.50
9
10
11
6
7
30 Miscellaneous Expense
Cash
Bank service and collection
charges.
19.00
8
19.00
14
15
9
10
11
12
13
4
5
7
8
3
12
30 C. R. Merkle, Drawing
Cash
Withdrawal from ATM not recorded.
150.00
13
150.00
15
16
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14
16
281
CHAPTER 6
Bank Accounts and Cash Funds
Problem 6-2B
GENERAL JOURNAL
DATE
1
2
20-Mar.
3
4
5
DESCRIPTION
POST.
REF.
PAGE
DEBIT
CREDIT
1
1 Petty Cash Fund
Cash
Established Petty Cash Fund,
Ck. No. 314.
100.00
2
100.00
3
4
5
6
6
31 Office Supplies Expense
Delivery Expense
Miscellaneous Expense
Advertising Expense
R. C. Stowe, Drawing
Cash
Reimbursed Petty Cash Fund,
Ck. No. 372.
7
8
9
10
11
12
13
14
6.50
17.90
30.60
21.50
20.00
7
8
9
10
11
96.50
12
13
14
15
15
16
16
17
17
18
18
19
19
20
20
21
21
22
22
23
23
24
24
25
25
26
26
27
27
28
28
29
29
30
30
31
31
32
32
33
33
34
34
35
35
36
36
37
37
38
38
282
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CHAPTER 6
Bank Accounts and Cash Funds
Problem 6-2B (concluded)
PETTY CASH PAYMENTS RECORD
PAGE
DISTRIBUTION OF PAYMENTS
VOUCHER
NO.
DATE
1
20--
2
Mar.
EXPLANATION
PAYMENTS
OFFICE
SUPPLIES
EXPENSE
DELIVERY
EXPENSE
MISC.
EXPENSE
OTHER ACCOUNTS
ACCOUNT
AMOUNT
1
1
Established fund,
2
Ck. No. 314, $100
3
3
4
4
1
Taxi fare
7.60
5
7
2
Memo pads
6.50
6
9
3
Basketball
6.50
5
21.50
8
16
4
Postage stamps
9
20
5
Snow removal
10.00
10
25
6
Delivery charge
12.00
11
28
7
Withdrawal by
Expense
8.80
6
21.50
8
10.00
9
12.00
10
20.00
13
29
8
Postage
4.20
14
30
9
Delivery charge
5.90
15
31
Totals
96.50
Drawing
11
20.00
4.20
17.90
14
30.60
41.50
16
17
18
Balance in Fund
19
Reimbursed fund,
21
15
16
17
20
12
13
5.90
6.50
7
8.80
R. C. Stowe,
R. C. Stowe
12
4
Advertising
programs
7
7.60
Ck. No. 372
Total
$
3.50
18
19
96.50
20
$100.00
21
22
© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.
22
283
CHAPTER 6
Bank Accounts and Cash Funds
Problem 6-3B
GENERAL JOURNAL
DATE
1
2
20-Apr.
3
4
5
6
7
DESCRIPTION
POST.
REF.
PAGE
DEBIT
CREDIT
1
1 Cash
Cash Short and Over
Income from Services
To record revenue earned
during the day involving a
cash shortage of $1.25.
385.50
1.25
2
3
386.75
4
5
6
7
8
8
9
10
11
12
13
14
2 Cash
Income from Services
Cash Short and Over
To record revenue earned
during the day involving a
cash overage of $3.10.
585.75
3 Cash
Cash Short and Over
Income from Services
To record revenue earned
during the day involving a
cash shortage of $0.90.
585.75
0.90
4 Cash
Incomes from Services
Cash Short and Over
To record revenue earned
during the day involving a
cash overage of $2.90.
626.15
9
582.65
3.10
10
11
12
13
14
15
15
16
17
18
19
20
21
16
17
586.65
18
19
20
21
22
22
23
24
25
26
27
28
23
623.25
2.90
24
25
26
27
28
29
29
30
30
31
31
32
32
33
33
34
34
35
35
36
36
37
37
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CHAPTER 6
Bank Accounts and Cash Funds
Problem 6-4B
Northern Motel
Bank Reconciliation
July 31, 20—
$1,576.06
630.00
Bank Statement Balance
Add:
Deposit in transit (July 31)
$2,206.06
Deduct: Outstanding checks
No. 1631
No. 1632
No. 1633
$118.20
78.20
178.36
374.76
Adjusted Bank Statement Balance
$1,831.30
Ledger Balance of Cash
Add:
$1,909.30
Deduct: NSF check from T. R. Royce
Bank service and collection charges
Error in recording Check No. 1617
payable to Mitchel Company
$ 37.00
23.00
18.00
$1,831.30
Adjusted Ledger Balance of Cash
GENERAL JOURNAL
DATE
1
2
3
4
5
20-July
78.00
DESCRIPTION
PAGE
POST.
REF.
DEBIT
CREDIT
1
31 Accounts Receivable
Cash
NSF check received from
T. R. Royce.
37.00
2
37.00
4
5
6
7
8
9
10
6
31 Miscellaneous Expense
Cash
Bank service and collection
charges.
23.00
31 Accounts Payable
Cash
Error in recording Ck. No. 1617
payable to Mitchel Company.
18.00
7
23.00
13
14
15
8
9
10
11
12
3
11
12
18.00
13
14
15
16
16
17
17
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285
CHAPTER 6
Bank Accounts and Cash Funds
Problem 6-4B (concluded)
THIS FORM IS PROVIDED TO HELP YOU BALANCE
YOUR BANK STATEMENT
CHECKS OUTSTANDING—NOT
CHARGED TO ACCOUNT
No.
1631
1632
1633
$
118.20
78.20
178.36
BEFORE YOU START
PLEASE BE SURE YOU HAVE ENTERED IN YOUR CHECKBOOK ALL AUTOMATIC TRANSACTIONS SHOWN ON
THE FRONT OF YOUR STATEMENT.
YOU SHOULD HAVE ADDED
YOU SHOULD HAVE SUB-
IF ANY OCCURRED:
TRACTED IF ANY OCCURRED:
1. Loan advances.
1. Automatic loan payments.
2. Credit memos.
2. Automatic savings transfers.
3. Other automatic deposits.
3. Service charges.
4. Debit memos.
5. Other automatic deductions
and payments.
BANK BALANCE SHOWN
ON THIS STATEMENT
$
1,576.06
(IF ANY)
$
630.00
TOTAL
$
2,206.06
CHECKS OUTSTANDING
$
374.76
BALANCE
$
1,831.30
ADD
DEPOSITS NOT SHOWN
ON THIS STATEMENT
SUBTRACT
SHOULD AGREE WITH YOUR CHECKBOOK BALANCE
TOTAL $
374.76
AFTER DEDUCTING SERVICE CHARGE (IF ANY)
SHOWN ON THIS STATEMENT.
Please examine immediately and report if incorrect. If no reply is received within 10 days, the account will be considered correct.
IN CASE OF ERRORS OR INQUIRIES ABOUT YOUR BILL
Send your inquiry in writing on a separate sheet so that the creditor receives it within 60 days after the bill was mailed to you.
Your written inquiry must include:
1. Your name and account number;
2. A description of the error and why (to the extent you can explain) you believe it is an error; and
3. The dollar amount of the suspected error.
If you have authorized your creditor to automatically pay your bill from your checking or savings account, you can stop or reverse payment on any amount you think is wrong by mailing your notice so that the creditor receives it within 11 days after the
bill was sent to you.
You remain obligated to pay the parts of your bill not in dispute, but you do not have to pay any amount in dispute during the
time the creditor is resolving the dispute. During that same time, the creditor may not take any action to collect disputed
amounts or report disputed amounts as delinquent.
This is a summary of your rights; a full statement of your rights and the creditor's responsibilities under the Federal Fair Credit
Billing Act will be sent to you both upon request and in response to a billing error notice.
286
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CHAPTER 6
Bank Accounts and Cash Funds
SOLUTIONS TO ACTIVITIES
CONSIDER AND COMMUNICATE
Suggested Response
The Petty Cash Fund operation will be more efficient if the company requires a completed
and signed voucher, listing date, amount paid, and the name of the account charged for
every withdrawal. The company should limit the fund to business use by discouraging
personal check cashing. Management should put the cash in a locked place and limit its
access to you and perhaps one other responsible person you designate. The owner or
accountant should monitor the amount in the fund to see that it is adequate and that all
records are accurate.
WHAT'S WRONG WITH THIS PICTURE?
Suggested Response
This practice is unethical and possibly illegal. While the amounts may be small, it is still
the owner’s job (after taxes) to attempt to make things balance after errors have been made.
It is not your job.
Also, if the owner does not know there are overages and shortages and the amount of
each, no effort will be made to improve the company’s process of handling cash.
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287