Cash Control Who s Got the Money? Accounting 30S

Transcription

1 Cash Control Who s Got the Money? Accounting 30S

2 Lesson 1 Control of Cash Receipts Outcomes: Explain the different forms of cash Discuss the principles of cash control Differentiate between ethical and unethical practices of cash control Define cash float Prepare a daily cash proof Differentiate between cash shortages and cash overages Explain the need for a cash short/over account Analyze and record cash over and short transactions in a General Journal Prepare a bank deposit Apply the appropriate accounting principle

3 Cash Receipts Cash is defined as any item that is acceptable for deposit. It includes the following: Dollar bills and coins Cheques Bank drafts and money orders

4 Daily cash receipts of a business are usually received as follows: Electronic funds transfer systems enable depositors to transfer money in and out of their bank accounts instead of depositing funds in the bank or writing cheques (e.g. automatic teller machines, automatic bill payment plans, telephone banking, and the use of debit cards) Electronic funds transfer systems also reduce the risk of embezzlement

5 Daily cash receipts of a business are usually received as follows: Electronic voucher or cash register audit tapes a continuous record of all transactions during the day. Electronic vouchers also provide a continuous record of all transactions during the day and eliminate paper handling

6 Daily cash receipts of a business are usually received as follows: Credit and debit card vouchers credit cards are to buy now and pay later; debit cards are used to buy and pay now A business that accepts debit cards receives the cash immediately the money is transferred from the customer s bank account directly through a point-of-sale terminal (an electronic cash register connected to a computer)

7 The debit and credit card sales are listed and totalled electronically by a transselect machine on a sales recap form. The advantages of this system are: Payment is received immediately Paper handling is reduced Counting of cash is reduced No NSF cheques are received Opportunity for embezzlement is reduced

8 Principles of Cash Control Necessary because cash is the single item most likely to be stolen or embezzled by employees Embezzlement is a theft of assets that is concealed by falsification of accounting records Fraud is the deliberate misrepresentation of facts with the intent of deceiving someone Employee fraud refers to dishonest acts performed by the employees of a company in spite of management s efforts to prevent these actions Ethics are standards of conduct that society believes people should follow. Ethics are the moral principles an individual uses in governing his or her behaviour the rules by which an individual distinguishes right from wrong

9 Cash Balances A cash float or change fund is a small quantity of money of approximately $50 in small bills and coins (1 x $10; 3 x $5; 5 X $2; 6 x $1; 20 x.25; 25 x.10; 25 x.05; 25 x.01) This fund is used to make change for customers and is placed in the cash register drawer at the beginning of each business day

10 Cash Proof Any cash shortages and overages will need to be accounted for in a journal entry: Cash Short/Over Debit 1.25 Cash Credit 1.25 The entry is reversed if the cash balance is over instead of short.

11 Objective Evidence Principle Each transaction is described by a business document that proves the transaction did occur. All source documents are evidence that business transactions have taken place (e.g. sales recap form, cash proof)

12 Assignment Page 543 ex. 1, 2, 3

13 Lesson 2 Sales And Goods and Services Tax Outcomes: Define Federal Goods and Services Tax (GST) Describe the purposes and concepts of GST Calculate GST Define Provincial Sales Tax (PST) Describe the purposes and concepts of PST Calculate PST Differentiate between GST Payable and PST Payable Analyze and record GST and PST collected on sales in a General Journal

14 Outcomes continued Analyze and record GST Refundable Analyze GST Payable and GST Refundable account balances to determine the refund/remittance amount Record remittance of GST Payable to the federal government Analyze PST Payable account balance to determine the amount to be remitted to the provincial government (without Sales Tax Commission) Calculate the Sales Tax Commission for Manitoba Calculate and record remittance of Provincial Sales Tax owing to the Manitoba government

15 Goods and Services Tax (GST) GST is a federal tax on the sale of Goods and Services GST is designed so that: The government receives its money at each stage in the production/distribution process as value is added to the product In the end, only the final user pays GST h/economy/1991gst.html Introduced in 1991 at a rate of 7% by Conservative government when Brian Mulroney was PM

16 GST GST is a percentage tax based on the price of goods Effective January 1, 2008, the GST rate is reduced from 6% to 5%

17 Provincial Sales Tax (PST) PST is a sales tax imposed on retail sales in all provinces except Alberta One way provincial governments raise funds A percentage tax based on the price of goods sold to a consumer PST is not charged on goods for resale; however, the purchaser must apply to the provincial government for a PST-exempt number

18 Provincial Sales Tax This number must be provided when purchasing such goods that will be resold in order to qualify for the tax exemption this is so goods are not double-taxed. NB, NS and NF have implemented a harmonized sales tax (HST) that includes both PST and GST

19 Current PST Rates Province PST Rate AB 0 BC 7 MB 7 NB NF NS 13 (HST) 13 (HST) 13 (HST) ON 8 PE 10 PQ 7.5 SK 5 tes2012.htm

20 Calculation of Taxes GST and PST is calculated as follows: Selling price of an item GST = selling price x % of GST 50 x 7% 3.50 PST = selling price x % of PST 50 x 7% 3.50 Total price of item Each tax is calculated on the selling price of the goods Do not calculate a tax on top of another tax

21 GST Charged on Sales and GST Paid on Purchases Account GST Charged on Sale account is a current liability account The tax collected is owed to the federal government

22 Filing Frequency When you register for GST/HST, a reporting period for filing your returns is assigned The reporting period is based on total annual sales of taxable goods and services in Canada Annually for annual taxable sales in Canada that are $500,000 or less Quarterly for annual taxable sales between $500,000 and $6 million Monthly for annual taxable sales that are more than $6 million

23 Accounting Implications GST Paid on Purchases account is a contra-liability account since it reduces the amount of a liability GST Charged on Sales account is a liability This account is reduced by the balance in the GST paid on Purchases account in order to determine the net amount owed to the federal government Current Liabilities GST Charged on Sales GST Paid on Purchases GST Owed

24 PST Principles When a company purchases supplies, equipment, or furniture for use in its business office, it must pay PST and GST GST Paid on Purchases is recorded separately but the PST is added to the cost of the supplies, equipment, or furniture and forms part of the cost of the item The same principle is applied to telephone, hydro, and heating expenses

25 PST Payable Account PST Payable is a current liability account The amount of tax collected is owed to the provincial government and must be remitted monthly pdf

26 Analyzing GST and PST 1. Cash Sales Received $495 plus GST and PST (7% each) from Janice Bergs for floral decorations. Issued invoice #57PF. She paid by cheque #115. Sept. 5 Cash GST Charged on Sales PST Payable Decorations Revenue

27 Analyzing GST and PST 2. Expense Transactions Purchased advertising on account from Tell It How It Is Ltd., invoice #412, for $315 plus GST and PST, Sept. 10 Advertising Expense GST Paid on Purchases Cash Note that PST becomes part of the expense amount and is not a separate entry in this type of transaction

28 Analyzing GST and PST 3. Purchased equipment for use in the business for $989 plus GST and PST (7% each) from Floral Scents Wholesale Inc., invoice #6947. Paid by cheque #72. Sept. 14 Equipment 1, GST Paid on Purchases Cash 1, Note that PST becomes part of the cost of the purchase of this asset.

29 Assignment Page Checking Your Reading-- #20-26a), Page 332 ex. 20, 21, 22, 23 (together), individually

30 Outcomes Petty Cash Explain a petty cash system Explain the need for a petty cash voucher Establish a petty cash fund Prepare a petty cash summary Replenish the petty cash fund Apply the appropriate accounting principle

31 Petty Cash System A system designed to control small expenditures A small amount of cash is borrowed from the main cash account An employee is given the responsibility of maintaining the petty cash fund Fund is used to pay for items it would be impractical to write a cheque for (e.g. taxi fare, stamps, coffee, courier)

32 The petty cash account is a current asset that is debited when the fund is established or increased A petty cash voucher is a signed authorization for small payments Vouchers are kept in the petty cash box with the remaining cash The petty cash summary is a categorized list of the expenditures supported by the petty cash vouchers The total of the vouchers plus the remaining cash should equal the starting amount of the fund

33 Establishing the Fund Oct. 1 Petty Cash 100 Cash 100 To establish petty cash fund

34 Replenishing the Fund When the fund is running low, the following steps are performed: 1. the cash in the petty cash box is totalled ($14) 2. The vouchers in the petty cash box are totalled ($86) If it doesn t balance, an entry is made in the General Journal to the Cash Short and Over Expense account

35 Replenishing the Fund 3. A journal entry is prepared to show what the funds were spent on (debits) and a credit to cash e.g. Nov. 30 Advertising Expense Supplies Miscellaneous Expense GST Paid on Purchases 5.28 Cash 86 To replenish petty cash

36 Note The Petty Cash account only appears in journal entries when: The fund is established The amount of the fund is changed (increased or decreased) The fund is closed

37 Assignment Page 544 ex. 4-6 (together), Page ex. 7 a)-c), 9 a) (individually)