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Lecture 11

COMMERCE 1AA3 Lecture Notes - Lecture 11: Non-Sufficient Funds, Bank Reconciliation, Accounts Receivable

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Emad Mohammad

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Commerce 1AA3 : Financial Accounting C03
Instructor : Aadil Juma
October 6th 2016
Internal Control of Cash are designed to
Prevent and avoid
Properly account for assets
Safeguard assets
Ensure accuracy of financial records
Separation of duties ( asset handling, record keeping, transaction approval)
Cash is the most susceptible asset to theft and fraud
Bank Reconciliation
For internal controls
Cash balance in the books is rarely equal to the cash balance - Bank reconciliation
identifies the reason
Causes of Differences
Deposits in Transit - money that has been deposited but not processed
Outstanding Cheques - Amount is on cheque, but has not been cashed
Bank Charges - Services fees for banking
Bank Credits - Money from bank, due from error in deposit, or interest, loans borrowed,
EFT ( electronic funds transferred)
Bank or Depositor Errors - could be done by bank or company, can appear in company
adjustment, or bank adjustment
NSF ( Non-Sufficient Funds ) - a bounced cheque received. The bank will charge the
company a fee
Bank Reconciliation Format
Section A
Balance per books
Add: Amounts collected by bank on behalf of company
Deduct : Bank service charges
Checks returned for insufficient funds from customers
Adjusted balance per books
Section B
Balance per bank
Add : Deposits not recorded by the bank
Deduct: Outstanding checks
Adjusted balance per books
Any adjustments on the books must be adjusted in the books by using adjusting entries.
Adjustments for books
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