Focus: Bank reconciliations, cash controls, NSF checks, outstanding checks, deposits in transit, petty cash.
Key Responsibility: Ensure cash records are accurate, safeguarded, and fully reconciled.
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Week 5 focuses on safeguarding and accurately managing cash — the most vulnerable asset. Students learn to prepare bank reconciliations, identify timing differences, correct errors, maintain petty cash, and implement cash controls.
Cash must be protected through accurate records, timely deposits, monthly reconciliations, and proper internal controls. Bookkeepers ensure cash is safeguarded, accounted for, and available when needed.
A bank reconciliation compares the company's book balance (Cash account) with the bank statement balance. Differences arise due to timing differences, bank adjustments, and errors.
The adjusted bank and adjusted book balances must match.
Petty cash is maintained using the imprest system, where the total petty cash fund remains constant and is replenished based on receipts.
Bank reconciliations help detect theft, missing deposits, altered checks, skimming, lapping, and unauthorized withdrawals. Reviewing reconciliations monthly is a vital internal control.
Students reconcile cash using a sample bank statement and cash ledger.
Students identify and correct errors in an incorrect reconciliation worksheet.
Students compute petty cash reimbursement amounts and record entries.
Why is bank reconciliation considered one of the most important internal controls? What real-world problems arise if cash accounts are not reconciled regularly?
Week 5 teaches students how to safeguard cash through proper reconciliations, journal entries, and strong cash controls. These skills ensure accurate financial statements and protect the organization against errors and fraud.
In Week 6, we move into Payroll Accounting & Employer Obligations.