ACC 221 1st Edition Lecture 14 Outline of Previous Lecture- Section 13: The Cash Account Cash Account Entrieso Cash Account: money goes in or comes outo Bank Reconciliation Bank Balance is Wrongo Deposits Outstandingo Check Outstanding Company Balance is Wrongo Service Chargeso Collection of a NoteOutline of Current Lecture - Section 14: Review Cash Account Cash Accountso Uses Bank Balance is Wrongo Deposits Outstandingo Check Outstanding Company Balance is Wrongo Service Chargeso Collection of a NoteCurrent Lecture- Section 14: Review Cash Account Cash Accounts o Uses Main function is to have the company’s money flowing in and out. However, atthe end of the accounting cycle when reconciling the balances, the balance may not always be correct, depending on if all of the transactions have been recorded in both the company’s side and the bank’s side of the balance recordings. Two causes for accounts to be wrong- Bank balance is wrong- Company balance is wrongThese notes represent a detailed interpretation of the professor’s lecture. GradeBuddy is best used as a supplement to your own notes, not as a substitute. Bank balance is wrongo Deposit outstanding Deposit outstanding – an item that the bank does not know about, and therefore is not reflected in the bank’s balance- Bank will correct once they find out- Bank’s side of reconciliation No need to make entry into accounting system; bank will take care of it, adjusting their balance to reflect the missing items and eventually matching your balanceo Check Outstanding Check outstanding – Checks that the bank does not yet know about- Will bring balances down, must record entry for the month. - Dr. Expense account, Cr. Cash Will eventually balance with company balance Company balance is wrongo Service Charges Service charges – fees owed due to average balance, number of checks written, number of deposits made, or other services provided by the bank The bank’s balance is correct, but the company must reconcile their account- Dr. Cash if increasing balance- Cr. Cash if decreasing balanceo Collection of a note For collections of loans, company may sign legal documents so the bank will handle the collection for them- Company receives the price of the loan, and interest from the loan- Company is charged a fee from the bank for their serviceso Cash increases from loan + interesto Cash Decreases from service fee- Entrieso Dr. Cash, Cr. Note Receivableo Dr. Cash, Cr. Interest Receivableo Dr. Service Charge, Cr. Casho These may be recorded as separate of all together When the company balance is wrong, entries must be made to correct the
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