Level: Easy
Easy Worked Examples: Accounting for Internal Control
Six easy worked examples on the basics of Form 5 Chapter 3 (cash control, the Bank Reconciliation Statement and the Cash Budget), using small round RM figures.
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Example 1: Methods of Cash Control
Question
Solution plan
Purpose of cash control: to protect cash from theft/misuse, to ensure all receipts are recorded, and to prevent unauthorised payments. Then list practical methods such as recording in the Cash Book, banking takings daily, and segregation of duties.
| Method | Description |
|---|---|
| Use a Cash Book | Record all cash receipts and payments |
| Bank takings daily | Reduce cash kept on the premises |
| Prepare a Bank Reconciliation Statement | Match the Cash Book with the Bank Statement |
| Use a Petty Cash system | Limit cash to small expenses only |
| Segregation of duties | The person receiving cash is not the one recording it |
Answer
The purpose of cash control is to protect cash, ensure every receipt is recorded and prevent unauthorised payments. Methods include recording in the Cash Book, banking takings daily, preparing a Bank Reconciliation Statement, using a Petty Cash system and segregation of duties.
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Example 2: Reasons for Balance Differences
Question
Solution plan
Timing items (unpresented cheque and uncredited deposit) are already recorded in the Cash Book but not yet in the Bank Statement. Bank-initiated items (bank charges and interest) are already in the Bank Statement but not yet recorded in the Cash Book.
| Item | Amount (RM) | Cash Book | Bank Statement |
|---|---|---|---|
| Unpresented cheque | 500 | Yes | No |
| Uncredited deposit | 300 | Yes | No |
| Bank charges | 50 | No | Yes |
| Deposit interest | 20 | No | Yes |
Answer
The unpresented cheque (RM500) and uncredited deposit (RM300) appear in the Cash Book only. Bank charges (RM50) and deposit interest (RM20) appear in the Bank Statement only.
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Example 3: Updating the Cash Book
Question
Solution plan
Start with the balance b/d on the debit side (RM2,000). The dividend increases money at the bank, so debit RM150. Bank charges reduce money, so credit RM50. The balance c/d is the difference between the two side totals.
| Particulars | RM | Particulars | RM |
|---|---|---|---|
| Balance b/d | 2,000 | Bank charges | 50 |
| Dividend | 150 | Balance c/d | 2,100 |
| 2,150 | 2,150 | ||
| Balance b/d | 2,100 |
Answer
The updated Cash Book balance is RM2,100 (debit balance). Calculated from RM2,000 + RM150 dividend − RM50 bank charges.
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Example 4: Bank Reconciliation Statement
Question
Solution plan
Start with the balance as per the Cash Book. The unpresented cheque means the bank has not yet deducted it, so the bank balance is higher: ADD RM400. The uncredited deposit means the bank has not yet added it, so the bank balance is lower: LESS RM200.
| Particulars | RM |
|---|---|
| Balance as per Cash Book | 1,500 |
| Add: Unpresented cheque | 400 |
| 1,900 | |
| Less: Uncredited deposit | 200 |
| Balance as per Bank Statement | 1,700 |
Answer
The balance as per the Bank Statement is RM1,700. Calculated from RM1,500 + RM400 unpresented cheque − RM200 uncredited deposit.
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Example 5: Identify Receipts & Payments
Question
Solution plan
Receipts are cash inflows (sales, capital, collections from debtors). Payments are cash outflows (purchases, rent, wages, asset purchases). Classify each item by the direction of cash flow.
| Item | Amount (RM) | Classification |
|---|---|---|
| Cash sales | 4,000 | Receipt |
| Additional capital | 5,000 | Receipt |
| Receipts from debtors | 800 | Receipt |
| Cash purchases | 3,000 | Payment |
| Pay rent | 600 | Payment |
| Pay wages | 1,000 | Payment |
| Buy furniture | 2,000 | Payment |
Answer
Receipts: cash sales RM4,000, additional capital RM5,000, receipts from debtors RM800 (total RM9,800). Payments: cash purchases RM3,000, rent RM600, wages RM1,000, furniture RM2,000 (total RM6,600).
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Example 6: Preparing a Cash Budget
Question
Solution plan
For each month: total the receipts, total the payments, and find Surplus/(Deficit) = receipts − payments. Closing balance = opening balance + Surplus/(Deficit). January's closing balance becomes February's opening balance.
| Particulars | January (RM) | February (RM) |
|---|---|---|
| Receipts | ||
| Cash sales | 3,000 | 3,500 |
| Receipts from debtors | 500 | 0 |
| Total Receipts | 3,500 | 3,500 |
| Payments | ||
| Cash purchases | 2,000 | 2,500 |
| Rent | 500 | 0 |
| Wages | 0 | 800 |
| Total Payments | 2,500 | 3,300 |
| Surplus/(Deficit) | 1,000 | 200 |
| Opening Cash Balance | 1,000 | 2,000 |
| Closing Cash Balance | 2,000 | 2,200 |
Answer
January: Total Receipts RM3,500, Total Payments RM2,500, Surplus RM1,000, Closing Balance RM2,000. February: Total Receipts RM3,500, Total Payments RM3,300, Surplus RM200, Closing Balance RM2,200.
Where marks are usually lost
Other sets for this chapter
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