AA015 TOPIC 6

FINANCIAL ACCOUNTING
AA015

KOLEJ MATRIKULASI
NEGERI SEMBILAN
SESSION 2020/2021

Topic 6
Accounting for Cash

Learning objectives

•

Definition Of Cash

Characteristics of internal controls for cash

Cash books / cash receipts journal and cash
payments journal and bank statements

Statement of bank reconciliation

DEFINITION OF CASH

The most liquid assets

1. Coin 3. Cheque
2. Money 4. Money Order

CASH

5. Cash in hand 7.Whatever the bank
6. Savings in bank accept as deposits

Characteristics of internal control for
cash

Cash Internal
Control

Cash Cash Payment
Receipts

PRINCIPLES OF CASH CONTROLS

1. Designation Of 3.Pre numbered
Task document

2. Segregation Of 4. Physical control
Duties
PRINCIPLES

5. Confirmation of 6. Rotation Of Task
the task

THE RECEIPT OF CASH

(Control – physical control)
Kept in a safe place
Example: locked savings box

(Control – Confirmation)
Compare the total receipts with the records from the
document
Example: Calculate the cash received with cash register or
bank-in slip

(Control – Rotation Of Task)
An employee should not do the same task for a long period.

THE RECEIPT OF CASH

(Control – Designation Of Duties)
Employees responsible to receive cash
Example: Cashier at the payment counter

(Control – Segregation Of Duties)
Different person in charge of receiving, recording and
bank in cash.
Example: Receiving – Officer 1

Recording – Officer 2

CASH PAYMENT

(Control – Designation Of Duties)
Identify who has the authority to sign the cheque
Example: Accountants - small amount cheque

Director - larger amount cheque

(Control – Segregation Of Duties)
Different individuals were assigned to different tasks in preparing
the document, authorising the payment and recording the
transaction.
Example: Preparing – Officer 1

Authorising – Manager
Recording – Officer 2

CASH PAYMENT

(Control – the procedure of document)
Proved by document with the serial numbers
Example: Receipts, bank deposit slip

(Control – Confirmation)
Compare the total payments with the records from the
documents
Example: Calculate the cash payments with payment
voucher

(Control – Rotation Of Task)
An employee should not do the same task for a long period.

CASH BOOK

1.Record the receipt of cash and cash
payment/cheque.

2.Able to detect the accuracy of the flow of Cash.
3.Show cash balance in hand and in bank

EXAMPLES OF CASH BOOK

(2 COLUMN)

CASH/CHEQUE IN (+) CASH/CHEQUE OUT (-)

CASH BOOK

Date Details Cash Bank Date Details Cash Bank

June June
1 b/f
5000 11200 2 Purchases 300

6 Sales 600 5 Al-Ali 1500

8 Al-Bakri 150 16 Stationery 120

30 Balance c/f 5030 10000

5150 11800 5150 11800

July 1 b/f 5030 10000

CASH/BANK
BALANCE

EXAMPLES OF CASH BOOK (3 COLUMN)

CASH BOOK

Date Details Discount Cash Bank Date Details Discou Cash Bank
5000 11200 June 2 Purchases nt 300

June b/f 600 5 Al-Ali 15 1500
1 Sales

6

8 Al-Bakri 10 150 16 Stationery 120

c/f 5030 10000

10 5150 11800 15 5150 11800

July 1 b/f 5030 10000

BANK STATEMENT

1. Shows the sum received by the bank.
2. Shows the amount paid by the bank on his

behalf and bank charges.
3. Compares between the details of bank

statements with bank account in the cash book.
4. Detect any mistakes
5. Detect fraud
6. Detect the difference balance in the bank

statement with the cash book

EXAMPLES BANK STATEMENT

paid (-) received
(+)

Date Cheque Description Debit Credit Balance
Number Cheque deposite (RM) (RM) (RM)
10000
July 1 5000
15000
3

4 00010 1250 13750
7 14750
Note receivable 1000

9 Cheque book 15 14735
15 00011 500 14235
31 Bank charges 14225
Total 10
13025 6000

EXAMPLES BANK STATEMENT

BANK RECONCILIATION

Compares and explain the differences
between cash on the company’s books (Cash
Book/CRJ CPJ) and
cash according to the bank’s records on a
specific date (Bank Statement)

THE DIFFERENCE BETWEEN THE CASH BOOK
AND BANK STATEMENT

Recorded in the Recorded in the
cash book but bank statement
not recorded in but not in the
the bank cash book
statement
Errors

REASON for
DIFFERENCE

THE DIFFERENCE BETWEEN THE
CASH BOOK AND BANK STATEMENT

Outstanding cheque

Deposit in transit Non Sufficient
Fund( NSF) -
Bounced Cheque

Recorded in the cash book but
there are no records in your bank

statement

THE DIFFERENCE BETWEEN THE CASH BOOK
AND BANK STATEMENT

Collection by the
bank

Bank Standing
charges instruction

Recorded in the bank
statements but not in the

cash book

THE DIFFERENCE BETWEEN THE CASH BOOK
AND BANK STATEMENT

By the bank (Understated or By the business
overstated bank Statement (Understated or overstated in
cash book balance)
balance)

Errors

RULES RECORDING IN CASH BOOK AND BANK
STATEMENTS

Dt. Cash Book ( Bank Column) Ct.

+ -

Acceptance of cash, Cash payment,
Cash Books shall be Cash Book will be
debited credited

On the other hand in the Bank Statement: Deposit
Ct.
Bank Statement
+
Payments
Dt. Cash receive, bank
statements will be
-
credited
Cash payments,
Bank statements

will be debited

FORMAT OF BANK RECONCILIATION

Syarikat Senang Hati
Bank Reconciliation Statement

as at 31 December 2015

Balance Per Bank Statement RM RM
Add : xxxx

Deposit In Transit xxxx
Errors (bank) xxxx xxxx

Deduct : xxxx
Outstandings Cheque xxxx xxxx
Errors (bank)
xxx
Adjusted Bank Balance

FORMAT OF BANK RECONCILIATION

Balance per cash book xxxx
Add :
xxxx xxxx
Receivable Notes (RN) xxxx xxxx
Interest Revenue RN (xxx) xxxx
(-) Charge collection note xxxx
Dividend Received xxxx
Credit Transfer
Errors

xxxx

Deduct : xxxx (xxxx)
Non Sufficient Fund (NSF) cheque xxxx xxxx
Bank Service Charges xxxx
Errors

Adjusted Cash Balance

STEPS IN THE PREPARATION OF BANK
RECONCILIATION

Step 1:
Compare the opening balances and closing balance the
Cash Book and the Bank statement
❑if there is a difference between the two is due to the cheque
issued by the business for the previous month but the
recipient has submitted this cheque to the bank in the current
month.
❑This item should be ignored in the current Bank
reconciliation.

Step 2:
Compare the item Cash Book with debit credit items in
Bank statements
❑Indicate (√) on the same items in both the documents
concerned.

STEPS IN THE PREPARATION OF BANK
RECONCILIATION

Step 3:
Compare credit items Cash Book with a debit item Bank
statements.
❑Indicate (√) on the same items in both the documents
concerned.

Step 4:
Determine whether there are errors in the Cash Book and the
Bank statement.
❑Errors may occur in the cash Book because recorded manually.

Step 5:
Set up Bank reconciliation Adjustment Journal Entries.
- Add and less as cash book balance in the BR

SUMMARY

1.Cash is the most liquid asset.

2.Internal controls are important for cash receipts and
payments that include setting tasks, segregation of duties,
physical control, pre numbered documentation, verification
and rotation of task.

3.The cash book is used to record the business cash flows
which is handling by the business.

4.Bank statement records the business cash flow business
which is administrated by the bank.

5.Bank reconciliation is prepared to co-ordinating the
differences between the bank statement and cash book.