You are president of your local division, responsible for cash receipts and disb

Question

You are president of your local division, responsible for cash receipts and disbursements. You are working with your local bank to discuss a new system where you invoices will indicate a 'send payments to' address that the bank will manage, providing your company scanned copies of all documents received. Explain, in a bulleted list, or brief paragraph, the pros and cons of this system, as it relates to cash receipts and cash disbursements. The Bank Balance presented on the bank statement totals $12,000 while the general ledger cash balance for this account, on the same date, the last day of the month, displays a value of $15,600. Please explain the issues related to this difference anyhow they would be resolved. Use you experience in creating a bank reconciliation to assist you in considering the variables. The auditors arrived to check the petty cash balance in your office. The account has a balance of $65 and the receipts not yet presented for reimbursement total $52. The Petty Cash Fund was issued

Explanation / Answer

Answer Q 8:

Your invoices indicates " Send Payments to  __________ (Bank Name and Address) is nothing but Lock-box System.

This technique of speeding up the mailing, processing and collection time which quite popular in USA and European countriies is the "Lock-box system". In the case of the concentration banking, cheques are received by a collection center and after processing, are deposited in the bank. Lock-box system helps the company to eliminate the time between the receipt of cheques and their deposit in the bank.

Advantages:

1. the bank handles the remittances prior to deposit at a lower cost.

2. It eliminates the period between the time cheques are received by the company and the time they are deposited

   in the bank for collection.

Disadvantages:

1. It involves costs.

Answer Q 9:

The Bank balance presented on the bank statement totals $ 12,000 while the general ledger cash balance shows

$ 15,000 on the same date.

This may be resulted from the bank debited directly certain amounts viz., charges ,interest etc.,

Answer Q 10: Question incomplete.

The question ends with "The petty cash fund was issued " -------

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