Bank Reconciliation Adjusting Entries
How do you record the collection of a note?
Debit Crash and Credit Notes Receivable
What is the entry to set up a petty cash fund?
DR Petty Cash $, CR Cash $
Why do we use Days' Sales Uncollected?
To estimate how much time is likely to pass before the current amount of accounts receivable is received in cash.
Deducts the Book Balance
Record notes receivable from sales
DR Notes Receivable $ and CR Sales $
How do you record bank fees?
Applying technological controls
What is the formula for Days' Sales Uncollected?
(Accounts Receivable / Net Sales) x 365
How do bank fees affect the bank reconciliation?
Deduct Book Balance
What is the Allowance for Doubtful Accounts?
A contra asset account that reduces accounts receivable. It has a normal credit balance.
The bank statement lists a $2,100 NSF check received from a customer, RAYE. The company had not recorded this.
Debit Accounts Receivable - RAYE $2,100 and Credit Cash $2,100
What are three examples of documents in a voucher? Why is a voucher important?
Purchase Requisition, Purchase Order, Invoice, Receiving Report, Invoice Approval, Check
What two criteria do cash equivalents (short-term, liquid investments) need to meet?
(2) Close to their due date, usually within three months
Where do corrections of bank/book errors go on the Bank Reconciliation?
Depends on the context; bank errors +/- bank balance, while book errors +/- book balance
What is the interest formula?
Principal of note X Annual interest rate X Time expressed in fraction of year
A bank statement says that the bank collected a $20,000 note and $1,000 of interest was earned.
Debit Cash $20,000 and Credit Notes Receivable $20,000; Debit Cash $1,000 and Credit Interest Revenue $1,000
A company replenishes its $300 petty cash fund. Its petty cash box has $80 in cash and petty cash receipts of $210 in repair expenses. The entry to replenish the funds includes?
DR Repairs Expense $210, DR Cash Over and Short $10, and CR Cash $220.
____ requires managers and auditors of public companies to document and verify internal controls.
Sarbanes-Oxley Act (SOX)
Bank balance: $6,000
Book balance: $5,650
Deposit in transit: $900
Outstanding checks: $550
Bank service charge: $50
Note collected by bank: $50
Adjusted Bank Balance: $6,350
Adjusted Book Balance: $6,350
When using the allowance method, we often use one of the following methods to estimate bad debts.
Percent of sales, percent of accounts receivable, or aging of accounts receivable.