INTACC [CCE KEY TERMS]

• Bank draft is a written order addressed to the bank to pay an amount or money to the order of the maker.
• Bank overdraft is a credit balance in Cash in Bank account resulting from checks being written for more than the cash amount on deposit.
• Bank service charge is a monthly fee charged by a bank to service the depositor's account.
• Bank reconciliation is a report that explains the difference between the book (company) balance of cash and the depositor's account balance reported on the bank statement.
• Bank statement is a bank's report on the depositor's beginning and ending cash balance and a listing of its changes, for a period.
• Canceled checks, also known as checks drawn, are checks that the bank paid and deducted from the depositor's account.
• Cash includes currency, coins and amounts on deposit in bank checking or savings accounts; an item acceptable for deposit at face value by a bank or other financial institutions. In a limited sense, it includes currency and coins and demand credit instruments that are unrestricted and immediately available for use in current operations.
• Cash equivalents are short-term, highly liquid investment assets that are readily convertible into a known cash amount or sufficiently close to their maturity date (usually within 90 days) so that the fair value is not sensitive to interest rate changes.
• Cash over and short is a profit or loss account used to record cash overages and cash shortages arising from errors in cash receipts or payments.
• Check is a document drawn by a depositor instructing the bank to pay a specified amount to a designated recipient or payee.
• Compensating balance is a minimum amount that a company agrees to maintain in a bank checking account as support for a loan by a depositor.
• Credit memos are deposits or credits made directly by the bank to the depositor's account such as notes collected by bank in favor of the depositor and proceeds of bank loan and interest earned on the depositor's account.
• Debit memos are charges to the company's or depositor's account made directly by the bank such as returned checks, bank service charge, charge for the cost of check booklets and payments of bank loans.
• Demand deposits are funds deposited in a bank that can be withdrawn upon demand.
• Deposit in transit is a deposit made near the end of the month and recorded on the depositor's books but not yet received by the bank in time to be reflected on the bank statement.
• Drawn against insufficient fund (DAIF) checks are checks drawn by a depositor but is subsequently returned by the bank to the payee because the deposit balance is not enough to cover the amount of the check.
• Financial asset is any asset that is cash, an equity instrument of another entity, or a contractual right to receive cash or another financial asset or to exchange financial assets or financial liabilities with another entity under conditions that are potentially favorable to the entity.
• Financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.
• Imprest system is a method to account for petty cash fund. Under this system, a constant balance is maintained in the fund, which equals cash plus petty cash receipts. When used with general cash control, it means a system of depositing cash collections intact to the bank and making payments through checks.
• Internal controls are the policies and procedures used to protect assets, ensure reliable accounting, promote efficient operations, and encourage adherence to company policies.
• Money order is a demand credit instrument issued and payable by a post office.
• Outstanding checks are checks written by the company and issued to payees but have not been cleared or presented to the bank for payment.
• Payroll bank account is a bank account used solely for paying employee's salaries.
• Petty cash is a small amount of cash maintained in a fund to pay minor and immediate expenses.
• Post-dated check is a check bearing a future date when issued. This check will be honored by the bank only on or after the date indicated on the face of the check.
• Proof of cash is a four-column bank reconciliation showing a reconciliation of beginning and ending balances of cash and cash receipts and disbursements during the period.
• Voucher system is a system that provides for the purchases and cash disbursements. Business documents are used to prepare vouchers to support all payments by check. The voucher identifies the person authorizing the expenditure, explains the nature of the transaction, and names the affected accounts.
• Cash is measured at face value, being its fair value on the date of acquisition and its fair value and amortized cost at the reporting date.
• Periodic bank reconciliation aims to uncover discrepancies between the bank balance and the depositor's balance for cash in the bank.
• The bank reconciliation may be prepared using the adjusted balance method, the book to bank format, and the bank to book format.
• The adjusted balance method has the advantage of showing the correct amount of cash balance shown in the statement of financial position.
• A more detailed bank reconciliation may be prepared by following the proof of cash format.
• A proof of cash reconciles the bank's and depositor's beginning balance of cash, cash receipts and disbursements during the month, and ending balance of cash.