FINANCIAL+MANAG.ACCT.
9th Edition
ISBN: 9781260728774
Author: Wild
Publisher: RENT MCG
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Chapter 6, Problem 4E
To determine
Concept Introduction: Cash management is a system that allows efficiency in receipt and payment, not cash. Its main aim is to encourage the collection of receivables, promote planned expenditure, keep only necessary assets, and encourage investment of excess cash.
The
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Determine whether each policy below is good or bad cash management, then identify the cash management strategy violated or followed for each policy.
1. The company negotiates credit terms with suppliers to delay payment of liabilities as long as possible
2. Excess cash is put in checking accounts, earning no interest income.
3. Cash receipts and cash payments are regularly planned and reviewed.
4. Customers are offered discounts to pay early.
5. All equipment is purchased, even equipment infrequently used.
Good or Bad
Cash Management Strategy
Determine whether each policy below is good or bad cash management; then identify the cash management strategy violated or followed for each policy. 1. Bills are paid as soon as they are received. 2. Cash receipts and cash payments are regularly planned and reviewed. 3. Excess cash is put in checking accounts, earning no interest income. 4. Customers are regularly allowed to pay after due dates without concern. 5. Rarely used equipment is rented rather than purchased.
Determine whether each cash payment procedure is an internal control strength or weakness. 1. A voucher system is used for all payments of liabilities. 2. The owner of a small business has authority to write and sign checks. 3. When the owner is out of town, the recordkeeper is in charge of signing checks. 4. To save time, all departments are allowed to incur liabilities. 5. Payments over $100 are made by check. 6. Requesting and receiving merchandise are handled by the same department.
Chapter 6 Solutions
FINANCIAL+MANAG.ACCT.
Ch. 6 - Prob. 1QSCh. 6 - Prob. 2QSCh. 6 - Prob. 3QSCh. 6 - Prob. 4QSCh. 6 - Prob. 5QSCh. 6 - Prob. 6QSCh. 6 - Prob. 7QSCh. 6 - Prob. 8QSCh. 6 - Prob. 9QSCh. 6 - Prob. 10QS
Ch. 6 - Prob. 11QSCh. 6 - Prob. 12QSCh. 6 - Prob. 13QSCh. 6 - Prob. 14QSCh. 6 - Prob. 15QSCh. 6 - Prob. 16QSCh. 6 - Prob. 1ECh. 6 - Prob. 2ECh. 6 - Prob. 3ECh. 6 - Prob. 4ECh. 6 - Prob. 5ECh. 6 - Prob. 6ECh. 6 - Prob. 7ECh. 6 - Prob. 8ECh. 6 - Prob. 9ECh. 6 - Prob. 10ECh. 6 - Prob. 11ECh. 6 - Prob. 12ECh. 6 - Prob. 13ECh. 6 - Prob. 14ECh. 6 - Prob. 15ECh. 6 - Prob. 16ECh. 6 - Prob. 17ECh. 6 - Prob. 1PSACh. 6 - Prob. 2PSACh. 6 - Prob. 3PSACh. 6 - Prob. 4PSACh. 6 - Prob. 5PSACh. 6 - Prob. 1PSBCh. 6 - Prob. 2PSBCh. 6 - Prob. 3PSBCh. 6 - Prob. 4PSBCh. 6 - Prob. 5PSBCh. 6 - Prob. 6SPCh. 6 - Prob. 1GLPCh. 6 - Prob. 1.1AACh. 6 - Prob. 1.2AACh. 6 - Prob. 1.3AACh. 6 - Prob. 1.4AACh. 6 - Prob. 1.5AACh. 6 - Prob. 2.1AACh. 6 - Prob. 2.2AACh. 6 - Prob. 3.1AACh. 6 - Prob. 3.2AACh. 6 - Prob. 3.3AACh. 6 - Prob. 3.4AACh. 6 - Prob. 1DQCh. 6 - Prob. 2DQCh. 6 - Prob. 3DQCh. 6 - Prob. 4DQCh. 6 - Prob. 5DQCh. 6 - Prob. 6DQCh. 6 - Prob. 7DQCh. 6 - Prob. 8DQCh. 6 - Prob. 9DQCh. 6 - Prob. 10DQCh. 6 - Prob. 11DQCh. 6 - Prob. 12DQCh. 6 - Prob. 13DQCh. 6 - Prob. 14DQCh. 6 - Harriet Knox, Ralph Patton, and Marcia Diamond...Ch. 6 - Prob. 2BTNCh. 6 - Prob. 3BTNCh. 6 - Prob. 4BTN
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Similar questions
- The purpose of a petty cash fund is toa. Provide a convenient form of payment for the company’s customers. b. Pay employee salaries at the end of each period. c. Provide cash on hand for minor expenditures. d. Allow the company to save cash for major future purchases.arrow_forwardWhich of the following are important elements of a cash disbursement control system? Note: Select all that apply. Check All That Apply All expenditures are authorized before a check is prepared. Checks are signed only by authorized Individuals. The bank-generated deposit slip should be compared with the check listing. The person opening the mall is not the person who maintains the accounting records. Unauthorized payments are prevented.arrow_forwardReview the following statements regarding a petty cash fund used in a business. Select the one that is correct. O A petty cash fund is controlled by top management. O The cashier of a fund will write checks for small payments like postage, supplies and deliveries, O Only the petty cashier is responsible for paying cash from the fund. OA check written against the fund is cashed when the fund is replenished.arrow_forward
- Which of the following practices contributes to efficientcash management? a. Never borrow money—maintain a cash balance suffi-cient to make all necessary payments. b. Record all cash receipts and cash payments at the endof the month when reconciling the bank statements.c. Prepare monthly forecasts of planned cash receipts,payments, and anticipated cash balances up to a year inadvance.d. Pay each bill as soon as the invoice arrives.arrow_forwardIndicate whether the following statements are true or false. A guideline for safeguarding cash is to separate the duties of those who have custody of cash from this who keep cash records. Choose... + A guideline for safeguarding cash is that all cash receipts be deposited monthly or yearly. Choose... Separation of duties eliminates the possibility of collusion to steal an asset and hide the theft from the records. Choose... + A voucher system of control is a control system exclusively for cash receipts Choose...arrow_forwardEntity A maintains a petty cash fund. At any given point of time, the cash on hand and the petty cash vouchers must be equal to the ledger balance of the petty cash fund. If these are not equal, the difference is either shortage or overage. This system of handling petty cash fund is called Imprest system Fluctuating balance system Pretty cash system Imprest System According to GAM for NGAs, the establishment of a petty cash fund Requires the approval of the head of the agency Requires the approval of the chief accountant Requires the approval of the office of the president Does not require any formal approval because petty cash funds are likely to be immaterial The “loans Receivable account is most likely to be used in the books of accounts of which of the following government agencies? COA NIA BTr All of these Entity A, a government entity, purchases inventories. To record a purchase, Entity A would most likely debit the (a) Inventory account Purchases account Expenses…arrow_forward
- Which of the following is an effective internal control for cash payments? A.Payments should be authorised before they are made B.Payments to suppliers should be made as quickly as possible C.An experienced accountant should have total responsibility for all cash payment functions D.Supporting documentation should be destroyed immediately afterpayment to avoid incorrectly paying twicearrow_forwardA cash payment under a good control system will have. a. Too much amount Bank book balance b. Appointing different persons to authorize the payment and sign the cheques c. Too much amount book balance d. Maintaining minimum bank book balancearrow_forwardA cash receipts under a good control system will have. a. Encourage receipt of money through cheque b. Keep minimum bank book balance c. Too much amount in Cash balance d. Too much amount in Bank balancearrow_forward
- Which of the following is not true? a. The Petty Cash account is debited when the fund is replenished. b. The imprest petty cash system in effect adheres to the rule of disbursement by check. c. Entries are made to the Petty Cash account only to increase or decrease the size of the fund or to adjust the balance if not replenished at year-end. d. All of these answer choices are not true.arrow_forwardWhich one of these principles is considered for cash disbursement control Select one: O a. Print check amount by machine O b. Same staff approve and make payment Oc. Reconcile bank statement annually O d. Rarely compare checks to invoicesarrow_forwardWhich of the following would not be considered good internal control for cash receipts? о A) Requiring the employee receiving cash from customers to also deposit the cash into the company's bank account. B) Recording cash receipts as soon as they are received. C) Allowing customers to pay with a credit card. D) Allowing customers to pay with a debit card.arrow_forward
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