ACCOUNTING AND FINANCE

LEVEL - III
Based on November , 2023 curriculum V -II

Module Title: Balancing Cash Holdings

Module code: LSA ACF3 M06 1123
Nominal duration: 80hrs

Prepared by: Ministry of Labor and Skills

November, 2023
Addis Ababa Ethiopia
Acknowledgment

Ministry of Labor and Skills wish to extend thanks and appreciation to the many representatives
of TVT instructors and respective industry experts who donated their time and expertise to the
development of this Teaching, Training and Learning Materials (TTLM).

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 Table of Contents
Acknowledgment...........................................................................................................................2
Acronym........................................................................................................................................5
Introduction of the module............................................................................................................6
Unit One: Cash floats....................................................................................................................8
1.1 Cash control mechanism.......................................................................................................9
1.1.1 Definition of Cash.............................................................................................................9
1.1.2 Basic Principles of Cash Management............................................................................10
1.1.3 Characteristics of cash....................................................................................................11
1.2 Cash control........................................................................................................................15
1.3 Recording records of individual taking..............................................................................18
1.3.1 Petty cash........................................................................................................................35
1.4 Basic Control to Cash.........................................................................................................39
1.5 Internal Control Cash..........................................................................................................40
1.5.1 Cash and Non-cash documents.......................................................................................46
1.6 Cash Transactions...............................................................................................................48
1.7 Cash budget........................................................................................................................51
1.8 Cash Reconciliation............................................................................................................53
Self-check -I................................................................................................................................60
Operation sheet: I........................................................................................................................63
Lap Test.......................................................................................................................................63
Unit Two: Operating POS machine.............................................................................................64
2.1. Terminal Balances..............................................................................................................65
2.1.1 Organization policies and procedures.............................................................................66
2.2. Terminal Information..........................................................................................................67
2.3. Security of policies and procedures....................................................................................68
Self-check –II.................................................................................................................................70
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References:....................................................................................................................................72
Developer profile.........................................................................Error! Bookmark not defined.

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 Acronym
ATM --------------------------------Automated teller machine

NBE---------------------------------National Bank of Ethiopia

POS----------------------------------Point of sale

EFT----------------------------------Electronic fund transfer

TV-----------------------------------Terminal value

DM----------------------------------Debit Memo

CM-----------------------------------Credit Memo

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 Introduction of the module
Maintaining accurate cash floats is an essential aspect of effective financial management in
various business settings. A cash float refers to the amount of cash kept on hand for day-to-day
operations, such as making change, providing refunds, or conducting small cash transactions.

The accuracy of a cash float is crucial as it ensures that there is enough cash available to meet
customer demands promptly while minimizing the risk of cash shortages or overages. By
maintaining accurate cash floats, businesses can enhance customer satisfaction, streamline cash
handling processes, and minimize the potential for errors or fraudulent activities.

This module covers the performance outcomes, skills and knowledge required to clear registers,
count money, calculate non-cash transactions and reconcile takings and balance cash holdings.

This module covers the following units:

 Cash floats.
 Operating POS machine.

Learning objectives of the Module:

At the end of the module the trainee will be able to:

 Maintain accurate cash floats

 Remove receipts from terminal
 Reconcile takings
Module Instruction
For effective use this modules trainees are expected to follow the following module
instructions:
 Read the information written in each unit
 Accomplish the Self-checks at the end of each unit
 Perform Operation Sheets which were provided at the end of
 Read the identified reference books for examples and exercises
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 Ministry of Labor and Version -1
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Unit One: Cash floats
This unit is developed to provide you the necessary information regarding the following content
coverage and topics:
 Cash control mechanism
 Cash control.
 Recording records of individual taking
 Basic control to cash
 Internal control of cash
 Cash transaction
 Cash budget
 Cash reconciliation
This unit will also assist you to attain the learning outcomes stated in the cover page.
Specifically, upon completion of this learning guide, you will be able to:
 Maintain cash control mechanism
 Determine cash control
 Apply recording records of individual taking
 Explain basic control to cash
 Explain internal of control
 Record cash transaction.
 Maintain cash budget.
 Record cash reconciliation

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1.1 Cash control mechanism
1.1.1 Definition of Cash

Cash refers to physical currency in the form of coins and banknotes that are used as a medium of
exchange for goods and services. It is a liquid asset that can be easily and immediately accessed,
making it widely accepted as a means of payment.

Cash is legal tender—currency or coins—that can be used to exchange goods, debt, or services.
Sometimes it also includes the value of assets that can be easily converted into cash immediately,
as reported by a company.

Figure 1-1: Cash (Ethiopian Birr)

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Cash in its physical form is the simplest, most broadly accepted and reliable form of payment,
which is why many businesses only accept cash. Checks can bounce and credit cards can be
declined, but cash in hand requires no extra processing. However, it's become less common for
people to carry cash with them, due to the increasing dependability and convenience of
electronic banking and payment systems.

1.1.2 Basic Principles of Cash Management

Many companies struggle, not because they fail to generate sales, but because they cannot
manage their cash. Managing the often-precarious balance created by the ebb and flow of cash
during the operating cycle is one of a company’s greatest challenges. Management of cash is the
responsibility of the company treasurer.
A company can improve its chances of having adequate cash by following five basic principles
of cash management
A. Increase the speed of collection on receivables
 The more quickly customers pay the more quickly a company can use those funds.
 Any attempt to force customers to pay earlier must be carefully weighed against the
possibility of angering or alienating customers.
 One common way to encourage customers to pay more quickly is to offer cash
discounts for early payment.
B. Keep inventory levels low
 Maintaining large inventories ties up large amounts of cash, as well as warehouse
space.
 Increasingly, firms are using techniques to reduce the inventory on hand, thus
conserving their cash.
C. Delay payment of liabilities
 A company should use the full payment period, but not “stretch” payment past the
point that could damage its credit rating.
D. Plan the timing of major expenditures

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  In order to increase the likelihood of obtaining outside financing, a company should
carefully consider the timing of major expenditures in light of its operating cycle. If
at all possible, the expenditure should be made when the company normally has
excess cash—usually during the off-season.
E. Invest idle cash
 Cash on hand earns nothing.
 An important part of the treasurer’s job is to ensure that any excess cash is invested,
even if it is only overnight.
 A liquid investment is one with a market in which someone is always willing to buy
or sell the investment.
 A risk-free investment means there is no concern that the party will default on its
promise to pay its principal and interest.

1.1.3 Characteristics of cash

 Medium of Exchange: Cash serves as a universally accepted medium of exchange in
many economies. It facilitates transactions and allows individuals to buy goods and
services from vendors.
 Legal Tender: Cash is a legal tender, which means it is recognized by the
government as a valid form of payment for all debts and obligations. However, there
may be limitations on the amount of cash that can be used for certain transactions.
 Physical Form: Cash exists in physical form, such as banknotes and coins, issued by
the National Bank of Ethiopia (central bank) or monetary authority of a country.
Different countries have their own unique currencies.
 Portability: Cash is highly portable, making it easy to carry and transfer from one
person to another. This feature makes it convenient for face-to-face transactions in
retail stores, markets, and various other places.
 Anonymity: Cash transactions provide a certain degree of anonymity as they do not
leave behind a digital trail. This characteristic can be advantageous for individuals
seeking privacy in their financial transactions.

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  Immediate Settlement: Cash transactions offer immediate settlement, ensuring that
the payment is made instantly at the point of sale. This can be beneficial in situations
where electronic payment systems may not be available or reliable.
 Limitations: Despite its advantages, cash also has some limitations. It can be lost or
stolen, leading to potential financial loss. Additionally, carrying large amounts of
cash may pose security risks.
 Divisibility: Cash can be divided into smaller units, allowing for different
denominations to accommodate various transaction sizes.
 Cash-Handling Costs: While cash is widely accepted, businesses and financial
institutions incur costs related to handling and processing cash. These costs include
expenses for cash storage, transportation, security measures, and cash management
systems.
 Digital Cash: With the rise of electronic payment systems, digital cash or e-cash has
gained popularity. E-cash refers to digital representations of physical cash that can be
used for online and mobile transactions.
Reporting cash

Reporting Cash although the reporting of cash is relatively straightforward, a number of issues
merit special attention. These issues relate to the reporting of:
I. Cash equivalents.
II. Restricted cash.
III. Bank overdrafts
Cash equivalents
Cash equivalents refer to highly liquid and short-term financial instruments that are easily
convertible to a known amount of cash and have original maturities of three months or less.
These instruments are considered so close to cash that they can be used as a temporary
placeholder for cash in financial statements.
Common examples of cash equivalents include:
 Treasury Bills (T-bills): Short-term government securities with maturities ranging from
a few days to one year.
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  Certificates of Deposit (CDs): Time deposits with a fixed maturity date, typically
ranging from a few days to several months.
 Commercial Paper: Short-term unsecured promissory notes issued by corporations.
 Money Market Funds: Investment funds that invest in short-term, low-risk securities,
such as Treasury bills and commercial paper.
 Banker's Acceptances: Time drafts drawn on and accepted by a bank, representing an
obligation to pay a certain amount at a future date.

Restricted cash

Restricted cash refers to funds that are set aside for a specific purpose and are not freely
available for general use by a company. These restrictions can arise from contractual agreements,
legal requirements, or internal policies. The presence of restricted cash is important to disclose in
financial statements because it provides transparency about the limitations on a company's use of
certain cash balances.
Common reasons for cash being classified as restricted:
 Loan Covenants: Lenders may impose restrictions on how a borrower uses its cash.
For example, a lender might require a certain amount of cash to be set aside as
collateral or as a reserve for debt service.
 Legal Settlements or Judgments: Cash may be set aside to cover potential legal
liabilities or settlements. This is common in cases where a company is involved in
litigation, and a court requires funds to be reserved for potential payouts.
 Regulatory Requirements: Certain industries or jurisdictions may have regulations
that require companies to set aside cash for specific purposes, such as environmental
cleanup, employee benefits, or other regulatory obligations.
 Escrow Accounts: Cash may be held in escrow for a specific transaction, such as a
real estate deal or a business acquisition. The funds are released upon the completion
of certain conditions or milestones.

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  Customer Deposits: In some cases, companies may receive cash from customers that
is earmarked for specific purposes, and these funds may be classified as restricted
until the related goods or services are delivered.

 Bank overdrafts: A bank overdraft occurs when a bank account balance goes below
zero, and a transaction is allowed to be processed, resulting in a negative balance. In a
business context, this situation can be intentional or unintentional.
Classification of cash

Figure 1-4. Classification of Cash-Related Items

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Types of Cash
There are several types of cash that are commonly used:
Coins:
 Physical currency in the form of metal coins, typically made of copper, nickel, or other
alloys. Coins are commonly used for smaller denominations.
Banknotes:
 Also known as bills or paper money, banknotes are printed currency issued by national
bank of Ethiopia (central banks). They come in various denominations and are widely
used for transactions.
Checks:
 A written order directing a bank to pay a specific amount of money from a person's
account to another person or organization. Although checks are becoming less common,
they can still be used as a form of payment.
Traveller's Checks:
 Preprinted, fixed-amount checks that can be signed and used like regular checks but are
typically used by individuals when traveling, as a safer alternative to carrying large sums
of cash.
Money Orders:
 A payment order issued by a postal service or financial institution, similar to a check
that guarantees the payment of a specified amount to a designated recipient. Money
orders are often used for sending money through mail or as a secure method of payment.
Prepaid Cards:
 These are cards that are preloaded with a specific amount of money. They function
similarly to debit or credit cards but do not require a bank account. Can be used for
purchases and withdrawals until the loaded amount is depleted.
1.2 Cash control
Cash control refers to the management and regulation of an organization's cash resources to
ensure efficiency, security, and accuracy in financial transactions. Effective cash control is

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crucial for maintaining liquidity, preventing fraud, and supporting overall financial stability.
Here are some key aspects of cash control:
A. Cash Handling Procedures: Establish clear and documented procedures for handling
cash, from the point of sale to the deposit in the bank. Define responsibilities for
individuals involved in cash handling to ensure accountability and minimize the risk of
errors or fraud.
B. Cash Receipts: Implement secure and standardized processes for receiving cash
payments. Use a point-of-sale (POS) system to record transactions and reduce the
reliance on manual handling of cash.
C. Cash Disbursements: Authorize and document all cash disbursements to ensure that
payments are legitimate and properly approved. Maintain separation of duties to prevent
any single individual from having control over all aspects of cash handling and
disbursements.
D. Cash Floats and Petty Cash: Establish and monitor cash floats for various departments
to facilitate day-to-day transactions. Implement controls over petty cash to track small,
miscellaneous expenses and prevent misuse.
E. Bank Reconciliation: Regularly reconcile the organization's bank statements with its
accounting records to identify and rectify any discrepancies. Investigate and resolve any
outstanding items, ensuring that the cash position in the records matches the actual bank
balance.
F. Cash Reporting and Monitoring: Generate regular reports on cash flow, including cash
receipts, disbursements, and ending balances. Monitor cash levels to ensure that the
organization maintains an adequate level of liquidity to meet its financial obligations.
G. Internal Controls: Implement internal controls, such as segregation of duties, dual
authorization, and regular audits, to safeguard against fraud and errors. Conduct periodic
internal and external audits to assess the effectiveness of cash control procedures.
I. Control of Cash Receipts
Internal control of cash receipts ensures that cash received is properly recorded and
deposited. Cash receipts can arise from transactions such as cash sales, collections of

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 customer accounts, receipts of interest earned, bank loans, sales of assets, and owner
investments.
The following internal control principles explained earlier apply to cash receipts
transactions as shown:
 Establishment of responsibility - Only designated personnel (cashiers) is
authorized to handle cash receipts.
 Segregation of duties - Different individuals receives cash, record cash
receipts, and holds the cash.
 Documentation procedures - Use remittance advice (mail receipts), cash
register tapes, and deposit slips.
 Physical, mechanical, and electronic controls - Store cash in safes and bank
vaults; limit access to storage areas; use cash registers.
 Independent internal verification - Supervisors count cash receipts daily;
treasurer compares total receipts to bank deposits daily.
 Other controls: Bond personnel who handle cash; require vacations; deposit
all cash in bank daily.
II. Control of Cash Disbursements
Internal control over cash disbursements is more effective when payments are made by
check, rather than by cash, except for incidental amounts that are paid out of petty cash.
The principles of internal control apply to cash disbursements as follows:
 Establishment of responsibility - Only designated personnel (treasurer) is
authorized to sign checks.
 Segregation of duties - Different individuals approve and make payments;
check signers do not record disbursements.
 Documentation procedures - Use prenumbered checks and account for them
in sequence; each check must have approved invoice.
 Physical, mechanical, and electronic controls - Store blank checks in safes
with limited access; print check amounts by machine with indelible ink.

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  Independent internal verification - Compare checks to invoices; reconcile
bank statement monthly.
 Other controls - Stamp invoices “PAID”.
 Electronic Funds Transfer (EFT) System: A new approach developed to
transfer funds among parties without the use of paper (deposit tickets, checks,
etc.). The approach, called electronic funds transfers (EFT), uses wire,
telephone, telegraph, or computer to transfer cash from one location to
another.

1.3 Recording records of individual taking

Recording records of individuals taking cash involves keeping a detailed record of all cash
transactions conducted by individuals. Here are some key points to consider when maintaining
these records:
 Cash Transactions: Record every transaction where an individual receives cash,
such as payments, loans, salary advances, or reimbursement of expenses. It is
important to accurately document the date, amount, purpose, and recipient's name for
each transaction.
 Supporting Documentation: Whenever possible, gather supporting documents to
substantiate the cash transactions. These may include receipts, invoices, expense
reports, loan agreements, or any other relevant documents that validate the purpose
and amount of the transaction.
 Cash Receipts: Keep track of any cash received by individuals, including details of
the source, date, and purpose of the funds. This can include cash received from sales,
cash gifts, cash loans, or any other form of cash inflow.
 Cash Disbursements: Similarly, record instances where an individual disburses cash,
indicating the recipients, dates, reasons, and amounts involved. This could include
expenses paid in cash, cash refunds given, or any other cash outflows made.
 Method of Recording: Establish a consistent method of recording these cash
transactions, which can be either manually in a ledger or electronically using

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 accounting software. Ensure that this record-keeping process is secure, organized, and
accessible for future reference or auditing purposes.
 Reconciliation: Regularly reconcile the recorded cash transactions with the actual
cash on hand to ensure accuracy. Conduct a cash count at specific intervals, compare
it with the recorded transactions, and investigate and rectify any discrepancies.
 Compliance and Regulations: Adhere to legal and regulatory requirements related
to recording cash transactions. Understand applicable tax laws, reporting obligations,
and any specific regulations governing the handling of cash in your jurisdiction. Seek
guidance from accounting professionals if needed.
Remember, maintaining accurate and comprehensive records is essential for financial
transparency, accountability, and effectively managing cash flow for individuals or
organizations.
Classification of Cash Flows

In order to provide information to users that will help them make an analysis of cash, the FASB
requires that the statement of cash flows consists of three categories:

A. Cash flows from operating activities

B. Cash flows from investing activities
C. Cash flows from financing activities
Operating activities: Transaction that enter in to the calculation of the net income, such as cash
receipts from the sale of goods and services, cash receipts from interest and dividend income,
and cash payment for inventory and expenses.
Investing activities: Transaction involving the purchase and sale of long term assets and
transactions that involve making and collecting loans.
Financing activities: Transactions that involve cash receipts or payments from changes in long
term liabilities and stockholders ‘equity such as:-

 Borrowing from creditors and

 Repaying these loans, and from selling stock to stockholders and paying dividends.

Classifications of cash receipt and payment

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 Cash flow from operating Activities:
Cash Inflows:

 Cash received from customers

 Receipt of interest payment
 Receipt of cash dividends
Cash outflows:

 Payment to suppliers to inventory

 Payment for operating expenses
 Payment for interest
 Payment for taxes
Cash flows from investing activities: investing activities refers to transactions that affect the
purchase and sale of long term assets and transactions that involve making and collecting loans.
Cash Inflows:

 Cash sales of plant assets

 Cash sales of stock owned in other companies
 Cash received from collecting the principal of loans made to others
Cash Outflows:

 Purchases of plant assets

 Purchases of stocks and bonds in other companies
 Purchases of government bonds
 Loan made to others
Cash Flows from financing activities: This section of cash flow statement reports the cash
received and paid from activities associated with long term liabilities and stock holders’ equity.
Cash Inflows:

 Issuance of common and preferred stock

 Cash receipts from the issuance of bonds and notes payable
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Cash Outflows:

 Payment of dividends to stockholders

 Repayment of cash loans
 Purchases of treasury stock
Determining Cash flows from Operating Activities

To determine the net cash flow from operating activities, we take revenue and expenses reported
on income statement and adjust them to determine the amount of cash received or paid for each
item.

Cash received from customer: if a business used the cash basis of accounting, the amount of
cash received from customers would equal the amount of sales.

Under accrual basis of accounting cash received from customers determined as:

Sales revenue + decrease in account receivable – Increase in accounts receivable

= Cash received from customer

Example: KK company had sales of ETB.256,000 in 2008, accounts receivable of ETB.45,000

at the beginning of the year, and ETB.51,000 at the end of the year. Calculate the amount of cash
received from customers.
Cash received from customer:
Sales……………………………ETB.256,000
Increase in accounts receivable……..(6,000)
ETB250,000
Cash Paid for inventory: The computation of cash paid for inventory begins with cost of goods
sold and is calculated as follows;

Cost of goods sold + Increase in inventory + Decrease in accounts payable - Decrease in

inventory - Increase in accounts payable

= Payment of inventory

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An increase in inventory indicates an increase in accounts payable, which leads to a cash
payment. A decrease in account payable indicates that cash has been paid, and an increase in
accounts payable indicates that cash has not been paid.

Example: KK company reported cost of goods sold of ETB.243,000 on its income statement.
KK’s balance sheet showed that merchandizes inventory increased by ETB.15,400 and accounts
payable decreased by ETB.14,000. Calculate the amount of cash paid for inventory.

Cost of goods sold ETB.243,000

Increase in merchandizing inventory 15,400
Decrease in accounts payable 14,000
Cash paid for inventory ETB272,400
Cash paid for operating expenses: In determining the amount of cash paid for operating
expenses, we do not include depreciation, because, unlike most expenses, no cash is paid when
depreciation is recorded. Depreciation is considered neither an inflow nor an outflow of cash. We
can find the amount of cash paid during the period of for operating expense as follows:

Operating expense other than depreciation+ Increase in prepaid expense + Decrease in accrued
liabilities– Decrease in prepaid expense – Increase in accrued liabilities

= Payment for operating expenses

Cash paid for interest: we can calculate the amount of cash paid for interest expense as follows:
Interest expense + Decrease in interest payable – Increase in interest payable

= Payment for interest expense

Cash paid for income taxes: our last calculation of cash paid in the operating activities section is
for income taxes. We determine the amount of cash paid for income taxes as follows:

Income taxes + Decrease in income tax payable – Increase in income tax payable

=Payment for income taxes

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Direct vs. indirect method of preparing a statement of cash flows

There are two methods of preparing the operating activities section: Indirect Method and Direct
Method. Both methods calculate the same total of cash flows from operating activities, although
the methodologies are considerably different. They differ only in the manner that data are
presented in the cash flows from operating activities section.
Information to prepare the statement of cash flows usually comes from three sources:
A. Comparative balance sheets,
B. The current income statement, and
C. Additional information.
Comparative balance sheets are used to compute changes in noncash accounts from the
beginning to the end of the period.
The current income statement is used to help compute cash flows from operating activities.
Additional information often includes details on transactions and events that help explain both
the cash flows and noncash investing and financing activities.

The direct Method: a method of reporting the cash flow from operating activities as the
difference between the operating cash receipts and the operating cash payments. The direct
method starts with the entire accrual-basis income statement (not just net income) and converts it
line-by-line to the cash basis. The resulting cash inflows and outflows are the cash flows used by
or provided by normal daily activities. For example, accrual-basis sales are converted to cash
collected from customers by adding the decrease or deducting the increase in trade accounts
receivable.
The direct method is preferred by the FASB as it provides more useful information the users of
the financial statements. The FASB requires that, if the direct method is used, that a
reconciliation of net income to net cash provided or used by operating activities be provided in
the footnotes or as part of the statement. This reconciliation frequently looks quite similar the
cash flow from operating activities section prepared using the indirect method.
 It is the one recommended by the FASB.

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  The direct method lists separately each major class of cash inflows and outflows from
operating activities

Cash received from customers:

Sales xx
Add: Decrease in accounts receivable xx
Less: Increase in accounts receivable xx
Payments to creditors and for expenses xx
Add: Cost of Merchandise Sold xx
Increase in inventories xx
Decrease in accounts payable xx
Decrease in accrued expenses xx
Decrease in interest payable xx
Decrease in income tax payable xx
Deduct: Increase in accounts payable xx
Decrease in inventories xx
Operating Expenses xx
Increase in accrued expenses xx
Interest Expense xx
Increase in interest payable xx
Income Tax Expense xx
Increase in income tax payable xx
= Net Cash Flows from Operating Activities xx

The Indirect Method: The indirect method starts out with net income and adjusts this figure to
obtain net cash flows from operating activities. To prepare a statement of cash flows using the
indirect method, we start out with net income and make the following adjustments:

1) Add depreciation expense. Depreciation is added back because it does not require a cash
payment

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 2) Subtract an increase in current assets other than cash. Increase in current asset (other
than cash) decreases the cash generated from operating activities.
3) Add a decrease in current asset other than cash. Decrease in current assets (other than
cash) increases cash generated from operating activities.
4) Add an increase in current liabilities. Increases in the amount owed to others cause an
increase in cash from operating activities.
5) Subtract an increase in current liabilities. Decreases in current liabilities result from cash
payment. This in turn, decreases the cash generated from operating activities.

As a result, decreases in current liabilities are subtracted from net income in calculating cash
flows from operating activities. The indirect method starts with net income and adjusts it for non-
cash transactions and other cash used by or provided by normal daily activities.

Net Income xx

Add: Noncash expenses (i.e., depreciation and amortization) xx

Losses on sales or retirements xx

Decreases in Current Assets xx

Increases in Current Liabilities related to operations* xx

Deduct: Increases in Current Assets xx

Decreases in Current Liabilities related to operations* xx

Gains on sales or retirements xx

= Net Cash Flows from Operating Activities xx

*Note that changes in non-operating current liabilities are included elsewhere on the statement.
For example, changes in dividends payable are combined the dividends declared to calculate
dividends paid in the financing section.
Investing Activities
Operating Activities include events and transactions that affect long-term assets.

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 Cash inflows from:
Sale of Long-term Assets xx
Property, Plant or Equipment xx
Intangible assets xx
Investments xx
Less: Cash outflows from:
Purchase of Long-term Assets xx
Property, Plant or Equipment xx
Intangible assets xx
Investments xx
= Net Cash Flows from Investing Activities xx

Financing Activities
Financing Activities include events and transactions that affect long-term liabilities and equity.
For example, the journal entry to record the issuance of bonds with a face value of ETB100,000
would be:
Cash………………………....100,000
Bonds Payable………………..100,000
To record issuance of bonds
The effect of this transaction is to increase long-term liabilities by ETB100,000. On the
statement of cash flows, the cash proceeds are reported as an inflow in the financing activities
section.
If the bonds are subsequently retired at 101, the journal entry would be
Loss…………………………….1,000
Bonds Payable……………….100,000
Cash……………………………….101,000

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The effect of this transaction is to reduce long-term liabilities by ETB100,000. On the statement
of cash flows, the cash spent is reported as an outflow in the financing activities section and the
loss is added to net income in the operating activities section as noted above.
Dividends paid are also included in the financing activities section. Dividends paid are not part
of the operating activities section because dividends do not appear in the income statement. They
are reported in the financing activities section because they relate to the equity section of the
balance sheet and cash flows from changes in equity are reported in this section.

Whenever the beginning balance does not equal the ending balance for dividends payable, the
dividends paid may have to be calculated using the following formula:

Beginning Dividends Ending Dividend

balance + declared - balance = paid

If the beginning balance equals the ending balance for dividends payable or there are no
beginning and ending balances for dividends payable, then the dividends paid equals the
dividends declared.
Cash inflows from:
Issuing debt or equity securities; xx
Issuing bonds xx
Issuing Stocks (Common and Preferred) xx
Reissuing Treasury Stocks xx
Issuing other long-term debts (mortgage payable, notes payable) xx
Less: Cash outflows from:
Retiring debts, repurchasing equity securities and paying dividends; xx
Payments to retire bonds xx
Payments to retire other long-term debts xx
Payments for Dividends xx
Payments to purchase Treasury Stock xx
= Net Cash Flows from Financing Activities xx
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Preparing a statement of cash flows involves five steps:
1) Compute the net increase or decrees in cash;
2) Compute and report the net cash provided or used by operating activities (using either the
direct or indirect method);
3) compute and report the net cash provided or used by investing activities;
4) Compute and report the net cash provided or used by financing activities; and
5) compute the net cash flow by combining net cash provided or used by operating,
investing, and financing activities and then prove it by adding it to the beginning cash
balance to show that it equals the ending cash balance.
Example: the net income reported on the income statement for the current year was
ETB.167,900. Depreciation on equipment and a building amounted ETB.41,300 for the current
year. Balances of the current assets and current liability accounts at the beginning and end of the
year are as follows:

Beginning of year End of year

Cash ETB.30, 900 ETB.27,900
Accounts receivable (net) 70,250 75,100
Inventories 110,900 120,400
Prepaid expenses 6,000 5,800
Accounts payable (Merchandize creditors) 65,300 67,200
Salaries payable 7,950 7,150
Income taxes payable 8,400 7,900

Required: Prepare the cash flows from operating activities section of the statement of cash flows
using the indirect method.

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Cash flows from operating activities-Indirect Method:

Net income ETB.167,900

Add: Depreciation ETB41,300
Increase in accounts payable 1,900
Decrease in prepaid expense 200 43,400
ETB211,300
Deduct: Increase in accounts receivable 4,850
Increase in inventories 9,500
Decrease in salaries payable 800
Decrease in income tax payable 500 ETB15,650
Net cash flow from operating activities ETB195, 650

Example 2: The income statement for Hope Company for the current year ended June 30 and
balances of selected accounts at the beginning and the end of the year as follows:
Sales……………………………………………………………ETB.935,600
Cost of merchandise sold…………………………………………….534,200
Gross profit……………………………………………………..ETB.401,400
Operating Expenses:
Depreciation expense…………………….54,200
Other operating expenses……………….195,700
Total operating expenses……………………………ETB.249,900
Income before income tax…………………………………………….151,500
Income tax expense…………………………………………………….65,300
Net income………………………………………………………..ETB.86,200

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 Beginning of year End of Year Increase (Decrease)
Accounts receivable (net) 93,000 96,500 3,500
Inventories 132,700 143,200 10,500
Prepaid expenses 8,900 7,500 (1,400)
Accounts payable 98,400 102,300 3,900
Accrued expense (operating) 14,000 12,400 (1,600)
Income tax Payable 2,000 2,000 0

Required: Prepare the cash flows from operating activities section of the statement of cash
flows, using the direct method.

Cash flows from operating Activities:

Cash received from customers ETB.935,600
Less: Increase in accounts receivable 3,500
Total cash Receipts 932,100
Outflows:
Cash paid for inventory 534,200
Less: Increase in accounts payable 3,900
Cash paid for operating expenses(195,700 + 1,600 – 1,400) 195,900
Cash paid for income taxes 65,300
Total cash payments 802,000
Net cash inflows from operating activities ETB130,100
Companies report these activities in either a separate schedule at the bottom of the statement of
cash flows or in a separate note or supplementary schedule to the financial statements.

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The comparative balance sheet for Double Company appears in the next page:
DOUBLE COMPANY
Comparative Balance Sheet
Dec. 31, 2006 Dec. 31, 2005
Assets
Cash ETB53,000 ETB12,000
Accounts receivable 6,000 8,000
Inventory 11,000 7,000
Prepaid expenses 2,000 3,000
Equipment 20,000 20,000
Accumulated depreciation—equipment (3,000) (2,000)
Total assets ETB89,000 ETB48,000
Liabilities and Stockholders' Equity
Accounts payable ETB 1,000 ETB 4,000
Long-term note payable 13,000 14,000
Common stock 38,000 18,000
Retained earnings 37,000 12,000
Total liabilities and stockholders' equity ETB89,000 ETB48,000
The income statement for the year is as follows:
DOUBLE COMPANY
Income Statement
For the Year Ended December 31, 2006
Sales (all on credit).............................................................. ETB280,000
Expenses and losses:
Cost of goods sold................................................................ 192,000
Operating expenses, exclusive of depreciation...................... 42,300
Depreciation expense............................................................ 1,000
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 Interest expense..................................................................... 1,200
Loss on sale of land............................................................... 2,500
Income taxes.......................................................................... 9,000
Total expenses and loss........................................................ 248,000
Net income........................................................................ ETB32,000

Cash dividends of ETB7,000 were paid during the year. Land costing ETB20,000 was acquired
by the issuance of common stock. The property was subsequently sold for ETB17,500 cash.
Instructions
Prepare a statement of cash flows for the year ended December 31, 2006, using;
(a) The direct method.
(b) The indirect method and
DOUBLE COMPANY
Statement of Cash Flows
For the Year Ended December 31, 2006 (Direct Method)
Cash flows from operating activities:
Cash receipts from customers ETB282,000(1)
Cash payments:
To suppliers 199,000(2)
For operating expenses 41,300(3)
For interest expense 1,200
For income taxes 9,000 250,500
Net cash provided by operating activities 31,500
Cash flows from investing activities:
Proceeds from sale of land 17,500
Cash flows from financing activities:
Payment of cash dividends (7,000)
Payment of long-term note (1,000)

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 Net cash used by financing activities (8,000)
Net increase in cash 41,000
Cash at beginning of period 12,000
Cash at end of period ETB 53,000
Noncash financing and investing activities:
Acquired land through issuance of common stock ETB20,000

DOUBLE COMPANY
Statement of Cash Flows
For the Year Ended December 31, 2006
(Indirect Method)
Cash flows from operating activities:
Net income ETB32,000
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation expense ETB1,000
Decrease in accounts receivable 2,000
Increase in inventory (4,000)
Decrease in prepaid expenses 1,000
Decrease in accounts payable (3,000)
Loss on sale of land 2,500 (500)
Net cash provided by operating activities 31,500
Cash flows from investing activities:
Proceeds from sale of land 17,500
Cash flows from financing activities:
Payment of cash dividends (7,000)
Payment of long-term note (1,000)
Net cash used by financing activities (8,000)

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Net increase in cash 41,000
Cash at beginning of period 12,000
Cash at end of period ETB53,000
Noncash financing and investing activities:
Acquired land through issuance of common stock ETB20,000
Computation
(1) Sales…………………………………….ETB280,000
Add: Decrease in accounts receivable…………2,000
Cash receipts from customers……… ETB282,000
(1) Cost of goods sold………………………ETB192,000

Add: Increase in inventory…………………...4,000

Purchases………………………………..... 196,000

Add: Decrease in accounts payable…………3,000

Cash payments to suppliers…………. ETB199,000

(2) Operating expenses, exclusive of depreciation……ETB42,300

Deduct: Decrease in prepaid expenses…………………1,000

Cash payments for operating expenses……… . ETB41,300

Cash Over and Short

Sometimes a petty cashier fails to get a receipt for payment or overpays for the amount due.
When this occurs and the fund is later reimbursed, the petty cash payments report plus the cash
remaining will not total to the fund balance. This mistake causes the fund to be short. This
shortage is recorded as an expense in the reimbursing entry with a debit to the Cash over and
Short account. (An overage in the petty cash fund is recorded with a credit to Cash Over and
Short in the reimbursing entry.) The Cash Over and Short account has two purposes:
 It will be debited or credited for the difference between the total of the
receipts and the cash required to replenish the petty cash account. If there are

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 missing receipts, the account is debited and if there is too much cash in the
account, the account is credited.
 It is used to record shortages or overages in the cash register. The cash in the
drawer represents a debit to cash. The cash register tape represents the credit
to sales. If there is a shortage, it is debited Cash Short and Over. If there is an
overage, it is credited Cash Short and Over.

Example: On November 20, New Company had cash sales of ETB3,555 according to the cash
register tape. However, when the cash in the register drawer was counted, ETB3,560 was
present.
Journalize any required transactions.
Cash………………………………3,560 (As counted)
Cash Over and Short ………………5 (3,560 – 3,555)
Sales…………………………...3,555 (Per register tape)
H. Security Measures: Implement physical and electronic security measures to protect cash
assets from theft or unauthorized access. Train employees on security protocols and
awareness to reduce the risk of internal and external threats.
I. Cash Forecasting: Develop cash forecasting models to anticipate future cash needs and
plan accordingly. Adjust cash management strategies based on seasonal variations,
economic conditions, and other factors that may impact cash flow.
J. Technology Integration: Leverage technology, such as accounting software, point-of-
sale systems, and secure payment gateways, to streamline cash management processes
and enhance accuracy.
1.3.1 Petty cash
Petty cash is a small amount of money a company keeps for small, incidental expenses. These
minor payments include office supplies, stationery, meals, client lunch, stamps, etc. The number
of petty cash funds could change depending on the organization’s size.

Petty cash is a small amount of actual cash that a company has on hand to purchase items that
cost so little that cutting a check doesn’t make sense or isn’t realistic.

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 Figure 1-3: petty cash

Each petty cash fund is managed by a petty cash custodian. In a small business, this person is
often the office manager or another trusted employee.

Petty cash journal entry steps

1. Journal Entry to Establishment or create the Petty Cash Fund
Debit Credit
Petty cash $XXX
Cheque account $XXX
To establish the initial petty cash fund by transferring cash from the checking account.
2. Journal Entry to Record the Monthly Expenses Paid From Petty Cash
Debit Credit

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Expense $XXX
Petty cash $XXX
To record expenses paid for out of petty cash.
3. Journal Entry to Replenish the Petty Cash Fund
Debit Credit
Petty cash $XXX
Chequing account $XXX
To transfer cash from the checking account to the petty cash fund to replenish the fund to
original balance
Example:
1. Company A has a petty cash fund for which it approved $100. The entry made is as
below:
Particulars Debit Credit
Petty cash $100
Cash $100
2. The custodian lets the cash balance decline to $10 before replenishing. Thus, the cashier
issues a check worth $90 for replenishment. Accordingly, the entry looks like this:
Particulars Debit Credit
Petty cash $90
Cash $90
3. The expenses as recorded by the cashier along with the amount used for replenishment
are entered as:
Particulars Debit Credit
Office expense $90
Petty Cash $90
 The petty fund amount, therefore, is now back to the authorized amount worth $100.

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Petty cash funds are typically operated on an imprest basis, meaning that when cash is expended
from the fund, it is replaced by a receipt in the same amount. The balance of an imprest fund
should always equal the balance established for the fund.
The operation of petty cash fund involves:
A. Establishing the fund,
B. Making payments from the fund, and
C. Replenishing the fund.
To illustrate, assume Z-Mart establishes a petty cash fund on November 1 and designates one of
its office employees as the petty cashier. A ETB75 check is drawn, cashed, and the proceeds
given to the petty cashier. The entry to record the setup of this petty cash fund is;

Nov. 1 Petty Cash . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . 75

Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
To establish a petty cash fund
After the petty cash fund is established, the Petty Cash account is not debited or credited again
unless the amount of the fund is changed. (A fund should be increased if it requires
reimbursement too frequently. On the other hand, if the fund is too large, some of its money
should be re-deposited in the Cash account.)

Assume that Z-Mart’s petty cashier makes several November payments from petty cash. During
November the following petty cash receipts were found in the petty cash box.

November 7 Delivery expense 5.00

November 9 Miscellaneous expense 46.50
November 18 Merchandise inventory 15.05
November 24 Supplies expense 4.75
Nov. 27 Miscellaneous Expenses . . . . . . . . . . . . . . . . . . . .46.50
Merchandise Inventory . . . . . . . . . . . . . . . . . . . . 15.05
Delivery Expense . . . . . . . . . . . . . . . . . . . . . . . . . . 5.00
Office Supplies Expense . . . . . . . . . . . . . . . . . . . . 4.75
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71.30

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 To reimburse petty cash

Increasing or decreasing a petty cash fund. A decision to increase or decrease a petty cash
fund is often made when reimbursing it. To illustrate, assume Z-Mart decides to increase its
petty cash fund from ETB75 to ETB100 on November 27 when it reimburses the fund. The
entries required are to (1) reimburse the fund as usual (see the preceding November 27 entry) and
(2) increase the fund amount as follows.
Nov. 27 Petty Cash . . . . . . . . . . . . . . . . . . . . . . . . . 25
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
To increase the petty cash fund amount.
 Petty cash fund is replenished when the amount in the petty cash fund reaches its minimum
level and at the end of accounting period regardless of the amount in the fund.

1.4 Basic Control to Cash

Cash is a critical asset for any organization, and implementing basic controls is essential to
safeguarding this asset, preventing fraud, and ensuring financial accuracy. Here are basic control
issues related to cash.

 Using Bank Accounts: To obtain desired control objectives, a company can vary the
number and location of banks and the types of bank accounts. For large companies
operating in multiple locations, the location of bank accounts can be important.
Establishing collection accounts in strategic locations can accelerate the flow of cash
into the company by shortening the time between a customer’s mailing of a payment and
the company’s use of the cash. Multiple collection centers generally reduce the size of a
company’s collection float. This is the difference between the amount on deposit
according to the company’s records and the amount of collected cash according to the
bank records. Large, multi-location companies frequently use lockbox accounts to
collect in cities with heavy customer billing.

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  Lockbox account: A lockbox account is a designated account set up by a
business with a financial institution, often a bank. It is used exclusively to
receive payments from customers.
 Cash in a safe box refers to the physical storage of cash within a secure and
locked container, typically a safe or a vault. The purpose of storing cash in a
safe box is primarily to ensure its safety, deter theft, and provide easy access
for authorized individuals.
 The Imprest Petty Cash System: The Imprest Petty Cash System is a method used by
organizations to manage and control small, routine expenses. It involves maintaining a
fixed amount of cash in a designated petty cash fund, which is replenished to a
predetermined level when it gets low. The Imprest Petty Cash System is designed to
ensure accountability, transparency, and efficient handling of minor cash expenditures.
 Physical Protection of Cash Balances: Not only must a company safeguard cash
receipts and cash disbursements through internal control measures, but it must also
protect the cash on hand and in banks. Because receipts become cash on hand and
disbursements are made from cash in banks, adequate control of receipts and
disbursements is part of the protection of cash balances, along with certain other
procedures.
 Reconciliation of Bank Balance: Bank reconciliation is a crucial accounting process
that ensures the accuracy and consistency between a company's accounting records and
its bank statement. This reconciliation helps identify discrepancies, errors, or fraudulent
activities.

1.5 Internal Control Cash

Cash is a liquid, portable, and desirable asset. Therefore, a company must have adequate controls
to prevent theft or other misuses of cash. To safeguard assets and enhance the accuracy and
reliability of its accounting records, companies follow internal control principles. An internal
control system consists of the policies and procedures managers use to;
 Protect assets.
 Ensure reliable accounting.
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  Promote efficient operations.
 Urge adherence to company policies.
The following six internal control principles apply to most enterprises:
I. Segregation of duties: Cash is generally received at cash registers or through the mail.
The employee who receives cash should be different from the employee who records
cash receipts, and a third employee should be responsible for making cash deposits at the
bank. Having different employees perform these tasks helps minimize the potential for
theft.
II. Proper authorization: Only certain people should be authorized to handle cash or make
cash transactions on behalf of the company. In addition, all cash expenses should be
authorized by responsible managers.
III. Adequate documents and records: Company managers and others who are responsible
for safeguarding a company's cash assets must have confidence in the accuracy and
legitimacy of source documents that involve cash. Important documents such as checks
are prenumbered in sequential order to help managers ascertain the disposition of each
document. This helps prevent transactions from being recorded twice or from not being
recorded at all. In addition, documents should be forwarded to the accounting department
soon after their creation so that recordkeeping can be handled professionally and
efficiently. Allowing documents that describe cash transactions to go unrecorded for an
unnecessarily long period of time increases the likelihood that fraudulent or inaccurate
records will pass undetected through the accounting department.
IV. Physical controls: Cash on hand must be physically secure. This is accomplished in a
variety of ways. Cash registers should contain only enough cash to handle customer
transactions. When a cashier finishes a shift—or perhaps more frequently—excess cash
should be moved from cash registers to a safe or another location that provides additional
security.
V. Independent checks on performance: Employees who handle cash or who record cash
transactions must be prepared for independent checks on their performance. These checks
should be done periodically and may be done without fore-warning. Having a supervisor

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 verify the accuracy of a cashier's drawer on a daily basis is an example of this type of
control.
VI. Other cash controls: Most companies bond individuals that handle cash. A company
bonds an employee by paying a bonding company for insurance against theft by the
employee. If the employee then steals, the bonding company reimburses the company.
Companies may also rotate employees from one task to another. Embezzlement or
serious mistakes may be uncovered when a new employee takes over a task. Although
specific cash controls vary from one company to the next, all companies must implement
effective cash controls.
Voucher System of Control

A voucher system is a set of procedures and approvals designed to control cash disbursements
and the acceptance of obligations. The voucher system of control establishes procedures for:
 Verifying, approving, and recording obligations for eventual cash disbursement.
 Issuing checks for payment of verified, approved, and recorded obligations.
Most medium and large companies use vouchers as part of their internal control over cash
disbursements. A voucher system is a network of approvals by authorized individuals acting
independently to ensure that all disbursements by check are proper.

The system begins with the authorization to incur a cost or expense. It ends with the issuance of
a check for the liability incurred. Vouchers are required for all types of cash disbursements
except those from petty cash. The voucher generally is prepared in the accounts payable
department.

The starting point in preparing a voucher is to fill in the appropriate information about the
liability on the face of the voucher. The vendor’s invoice provides most of the needed
information. Then, the voucher must be recorded (in the journal called a voucher register) and
filed according to the date on which it is to be paid. A check is sent on that date, the voucher is
stamped “paid,” and the paid voucher is sent to the accounting department for recording (in a
journal called the check register). A voucher system involves two journal entries, similar to any
accounts payable transaction, one to issue the voucher and a second to pay the voucher.
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 Counting Cash
Counting cash refers to the process of verifying and counting all the physical currency and coins
that have been collected throughout the day's transactions. It is an important step in financial
management, particularly for businesses that handle a significant amount of cash. It is commonly
performed by individuals or businesses to ensure accuracy and reconcile cash balances with
records or financial statements.
Cash counting is one of Secure Cash’s most valued services. It provides convenience for clients
who need help in sorting out their daily takings. It relieves you from the arduous duty of
manually counting cash and coins, giving you more time to do other important things.
The process typically involves the following steps:
 Gather all cash: Collect all cash from the cash registers, cash drawers, safes, and any
other cash storage locations.
 Separate denominations: Sort the bills into different denominations (e.g., Br.5, Br.10,
Br.50, Br. 100 and Br. 200).
 Count the bills: Begin counting the bills in each denomination. Use a counting machine,
if available, or count manually. Make sure to double-check the count for accuracy.
 Count the coins: Repeat the counting process for coins, sorting them and counting them
separately.
 Verify amounts: Add up the total value of each denomination to calculate the total cash
on hand. Make sure to cross-check it against the register records to ensure accuracy.
 Document the count: Record the cash count in a ledger or on a cash count sheet for
future reference.
 Reconcile discrepancies: If there are any discrepancies between the counted cash and the
expected amount based on sales records, investigate the cause and reconcile any
differences.
 Safeguard the cash: Store the counted cash securely in a safe or another designated
location.

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Counting cash at the close of business helps businesses maintain accurate financial records,
detect errors or discrepancies, prevent theft or loss, and ensure proper cash flow management. It
also provides insights into the daily revenue generated in cash transactions.
Cash discrepancies

Cash discrepancies refer to variances or differences that occur between the recorded cash balance
and the actual cash balance in an organization's books or financial records. These discrepancies
can arise due to various reasons, such as errors in recording transactions or deposits, bank
charges or fees, outstanding checks, or unrecorded transactions.
Types of Discrepancy
A. Data Entry Errors
One of the most common causes of discrepancies in data is data entry errors. When data is
entered manually, it is easy for errors to be made. This can lead to incorrect values being
recorded, or data being entered in the wrong fields.
B. Variations in Data Definitions
Another common cause of issues is variations in the way that different data sources are defined,
and how they measure key concepts. For example, two data sources may use different definitions
of "employment" or "poverty". This can lead to apparent discrepancies when the data is
compared.
C. Sampling Errors
Discrepancies can also occur due to sampling errors. This is particularly common when data is
collected from surveys. If a sample is not representative of the population as a whole, it can lead
to discrepancies in the data.
D. Changes over Time
Changes in the underlying data can also lead to discrepancies. For example, if the definition of a
concept changes over time, data from different periods may not be directly comparable. Also,
time means more sessions in programs you use at your organization. A single large change or
event also makes difference.
For example, changing a platform that records a large amount of information. These changes
compound and make reports, date information, and users all hard to track.
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 E. Data Processing Errors
Errors can also occur during the data processing stage. This can happen if data is incorrectly
coded or formatted. It can also occur if data is mistakenly deleted or duplicated.
Investigating and correcting discrepancies in order to maintain accurate cash floats involves the
following steps:
a. Identify the discrepancy: Start by comparing the expected cash float amount with the
actual cash amount. If there is a difference, you have identified a discrepancy.
b. Review transactions: Go through a detailed analysis of all cash transactions that
occurred since the last recorded cash float amount. This includes cash sales, refunds,
deposits, withdrawals, and any other relevant cash activities.
c. Verify records and documentation: Ensure that all cash transactions are properly
recorded and documented. Check cash register tapes, receipts, bank statements, and any
other relevant financial documents to verify the accuracy of the recorded transactions.
d. Reconcile errors: If any errors or omissions are found in the records, make necessary
adjustments to correct them. This can involve updating transaction entries, adjusting
balances, or making appropriate changes to the accounting system.
e. Cross-check with other sources: Compare your findings with other sources of
information, if available. For example, if you have an electronic point-of-sale (POS)
system, compare its records with your cash register tapes to ensure consistency.
f. Investigate further if needed: If the discrepancy persists or cannot be explained through
normal transactional activities, you may need to investigate further. This can involve
checking for potential employee theft, system malfunctions, or any other irregularities.
g. Implement preventive measures: To maintain accurate cash floats in the future,
consider putting in place preventive measures. This can include implementing checks and
balances, conducting regular cash audits, training employees on proper cash handling
procedures, and using technology solutions like cash management systems.

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 1.5.1 Cash and Non-cash documents
Collecting and calculating cash and non-cash document is an important process for businesses
to accurately record and manage their financial transactions. Here is a detailed explanation of
this process:
I. Collection of Documents:

 Cash Documents: Cash documents include receipts, invoices, sales registers, cash
register tapes, deposit slips, and any other document that provides evidence of cash
transactions. These documents are collected from various sources, such as cashiers,
sales counters, or automated point of sale (POS) systems.
 Non-cash Documents: Non-cash documents involve transactions that do not involve
physical cash. Examples include credit card receipts, bank statements, purchase
orders, invoices for credit purchases, electronic fund transfer (EFT) notifications, and
checks received from customers or issued by the business.
II. Sorting and Organizing:
 Once collected, cash and non-cash documents need to be sorted and organized. This
helps in streamlining the data entry process and maintaining accurate records.
 Cash documents can be sorted based on date, amount, type of transaction, or any
other relevant categorization.
 Non-cash documents may be organized by document type, vendor/customer name,
date, or any other suitable method.
III. Data Entry:
 After sorting, the information from each document needs to be accurately entered into
the accounting system. This can be done manually or through automation, depending
on the size and complexity of the business.
 For cash documents, the relevant data includes the date, amount, purpose of the
transaction, customer/vendor information, and any associated accounts affected (e.g.,
sales, cash on hand).

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  Non-cash documents often require additional information such as credit terms,
payment due dates, discount rates, and specific transaction details.
IV. Verification and Reconciliation:
 Once the data is entered into the accounting system, it is essential to verify and
reconcile the transactions recorded.
 Verification involves checking the accuracy of the data entered by cross-referencing
with the original documents.
 Reconciliation ensures that the accounting records match the supporting
documentation such as bank statements, credit card statements, or other relevant
records. This helps identify discrepancies and resolve any issues promptly.

V. Calculations and Reporting:

 Cash and non-cash transactions need to be accurately calculated and summarized for
financial reporting purposes.
 Calculation involves aggregating the transaction amounts based on different
categories (e.g., daily totals, monthly totals, by vendor/customer, by account).
 These calculations help in generating financial statements, budgeting, tax reporting,
and decision making.

The purpose of collecting cash and non-cash documents in the context of reconciling takings
is to accurately record and account for all the income received by a business. Cash documents
include physical currency, checks, and other forms of immediate payment, while non-cash
documents refer to credit card receipts, electronic transfers, and other forms of delayed or non-
immediate payment.

Collecting these documents allows businesses to track and reconcile their daily transactions,
ensuring that all sales and revenues are properly accounted for. This process helps in identifying
any discrepancies or errors, such as missing payments or incorrect amounts, allowing businesses

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to promptly address any issues. Additionally, it provides an audit trail for financial reporting
purposes and helps maintain accurate financial records.

1.6 Cash Transactions

A cash transaction refers to a transaction which involves an immediate outflow of cash towards
the purchase of any goods, services, or assets. Cash transaction can be consumer-oriented or
business-oriented.

A cash transaction stands in contrast to other modes of payment, such as credit transactions in a
business involving bills receivable. Similarly, a cash transaction is also different from credit card
transactions. The common definition of a cash transaction is an immediate payment for the goods
or services bought.

Steps in recording cash transactions:

1. Identify the nature of the transaction: Determine whether it is a sale, expense payment,
loan, receipt of cash, or any other type of cash transaction.
2. Prepare source documents: Collect and organize supporting documents such as
invoices, receipts, bills, or any other document that provides evidence for the transaction.
3. Determine the account categories: Identify the appropriate accounts involved in the
transaction. Common accounts may include cash, sales revenue, expenses, loans payable,
etc.
4. Choose a double-entry bookkeeping system: Utilize a system where each transaction
affects at least two accounts, ensuring that debits equal credits to maintain balance in the
accounting equation:

Assets = Liabilities + Equity

5. Record the transaction: Based on the double-entry system, record the transaction in a
journal or via accounting software. Include details such as the date, description of the
transaction, amounts, and the accounts involved.

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 6. Post entries to the general ledger: Transfer the recorded transactions to their respective
accounts in the general ledger. This creates a clear summary of all cash transactions
organized by account.
7. Prepare trial balance: Periodically check the accuracy of your records by preparing a
trial balance, which lists all the debits and credits to ensure they equal each other.
8. Reconcile cash: Regularly compare the cash balance in your accounting records with the
actual cash on hand through bank statements or physical counts. Adjust any discrepancies
accordingly.
9. Generate financial statements: Use the recorded cash transactions to produce financial
statements such as income statements, cash flow statements, and balance sheets. These
statements provide an overview of the financial health of the business.
10. Maintain proper record-keeping: Keep all supporting documents, including receipts,
invoices, and bank statements, organized and accessible for future reference or audits.
Examples of recording cash transactions:
A. Cash sales: Cash sales refer to transactions where goods or services are sold and payment is
made in cash. This means that the customer pays with physical currency or with funds
directly transferred from their bank account.
Example: January 15, 2022 sold merchandise worth Br.5000 in cash.
Date Account Debit Credit
2022 15 Cash 5,000
January Sales Revenue 5,000

B. Cash payment to suppliers: Cash payment to suppliers, also known as credit payment,
refers to the settlement of a debt or payment made to suppliers for goods or services
purchased on credit. In this case, instead of making immediate cash payment, the payment is
usually made at a later agreed-upon date.
Example: February 3, 2022 paid $1,000 in cash to a supplier for purchasing inventory.

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Date Account Debit Credit
2022 3 Accounts Payable 1,000
February Cash 1,000

C. Cash received from customers as a deposit: Cash received from customers as a deposit,
also known as advanced received payment, occurs when a customer pays a portion of the
total amount due in advance. This typically happens when a customer wants to secure a
product or service and is required to make a partial payment upfront.
Example: March 10, 2022 received a Br. 2000 cash deposit from a customer for a future
service.
Date Account Debit Credit
2022 10 Cash 2,000
March Unearned Revenue 2,000
D. Cash withdrawal by the owner: Cash withdrawal by the owner transactions involve the
owner of a business taking out cash from the company's account for personal use or other
non-business-related expenses. This transaction reduces the cash balance of the company and
represents a withdrawal of funds by the owner.
Example: April 5, 2022 the business owner withdraws Br. 3000 cash for personal use.
Date Account Debit Credit
2022 5 Owner's Withdrawals 3,000
April Cash 3,000

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1.7 Cash budget

Figure1-3: explanation of cash budget

A cash budget is an estimation of the cash flows of a business over a specific period of time. This
could be for a weekly, monthly, quarterly, or annual budget. This budget is used to assess
whether the entity has sufficient cash to continue operating over the given time frame. The cash
budget provides a company insight into its cash needs (and any surplus) and helps to determine
an efficient allocation of cash.

Functions of Cash Budget in an Organization

Cash budget is used as means of coordinating the activities of the various operating departments
of a concern. It is a device for coordinating and controlling the financial side of the business to
ensure solvency. Its main functions are as follows:

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 A. Forecasting the future needs of funds: It is possible to determine in advance, how much
funds will be needed and when? The raising of funds through most profitable source at
reasonable terms can be planned.
B. Controlling Cash Expenditure: It acts as a control device too. The expenses of various
departments can be cost controlled so as not to exceed the means of business.
C. Maintenance of Cash Planning: It helps in maintenance of Cash Planning, It helps in
maintaining an adequate cash balance for expected requirements and provides a
reasonable margin for the unexpected.
D. Helpful in Cash Planning: Cash budget helps in cash planning also. It shows the cash
surplus as well as deficiency of cash at selected points of time. If suggests the suitable
sources of financing, necessary to fill deficiency and investment of short-term surpluses.
Detailed explanation of maintaining cash within organization budget:
 Develop a comprehensive budget: Start by creating a detailed budget that outlines all
the expected sources of:
a. Cash inflows (such as revenue from sales, investments, or loans) and
b. Cash outflows (such as salaries, expenses, and loan repayments).
Make sure the budget is realistic and aligns with the organization's financial goals.
 Track and monitor cash flow: Implement a system to track and monitor the
organization's cash flow on a regular basis. This can be done through financial
statements, cash flow projections, and regular reviews of income and expenditure. By
closely monitoring cash inflows and outflows, you can identify any potential deviations
from the budget and take corrective actions.
 Control spending: Establish a process for approving and managing expenses within the
organization. Implement strict authorization procedures to ensure that all expenditures are
necessary, appropriate, and within the budget limits. Implement cost-saving measures
such as negotiating better deals with suppliers, reducing discretionary spending, and
eliminating unnecessary expenses.
 Improve cash collection: Enhance your organization's cash collection process to ensure
timely payments from customers or clients. Implement effective credit management

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 practices, offer incentives for early payments, and promptly follow up on overdue
invoices. This will help maintain a steady cash flow and minimize the risk of cash
shortages.
 Cash flow forecasting: Develop a cash flow forecast to estimate future cash inflows and
outflows. This helps in identifying potential cash shortfalls or surpluses and allows for
proactive management of cash reserves. A detailed forecast enables better decision-
making and planning to avoid situations where the organization may run out of cash or
have excessive idle funds.
 Maintain adequate cash reserves: It is essential to maintain sufficient cash reserves to
cover unexpected expenses, emergencies, or fluctuations in cash flow. Determine an
optimal level of cash reserve based on the organization's risk appetite and financial
stability. This ensures that the organization can continue operating smoothly even during
uncertain times.
 Review and adjust the budget: Regularly review the budget and compare it with actual
cash flow to identify any variations or discrepancies. If necessary, make adjustments to
the budget by reallocating resources, prioritizing expenditures, or revisiting revenue
targets. This allows for greater flexibility and adaptability to changing financial
circumstances.

Maintaining accurate cash floats within an organization's budget is important to ensure there is
enough cash on hand for day-to-day operations without tying up excessive funds.

Remember, effective cash management requires regular monitoring, planning, and adjusting of
the cash float to ensure the organization remains financially stable while meeting its operational
needs.

1.8 Cash Reconciliation

Bank reconciliation

Bank reconciliation is the process of comparing and reconciling the balance of a company's bank
statement with its own accounting records. The main purpose of bank reconciliation is to ensure

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 that both sets of records are accurate and reliable, and to identify any discrepancies or errors that
need to be resolved. Its
The main steps involved in bank reconciliation are as follows:
Step 1 Deposits in transit: Compare the individual deposits listed on the bank statement with
deposits in transit from the preceding bank reconciliation and with the deposits per company
records or duplicate deposit slips. Deposits recorded by the depositor that have not been recorded
by the bank are the deposits in transit. Add these deposits to the balance per bank.

Step 2 Outstanding checks: Compare the paid checks shown on the bank statement with (a)
checks outstanding from and (b) checks issued by the company as recorded in the cash payments
journal (or in the check register in your personal checkbook). Issued checks recorded by the
company but that have not yet been paid by the bank are outstanding checks. Deduct outstanding
checks from the balance per the bank.

Step 3 Errors: Note any errors discovered in the foregoing steps and list them in the appropriate
section of the reconciliation schedule. For example, if the company mistakenly recorded as Br.
169 a paid check correctly written for Br. 196, it would deduct the error of Br. 27 from the
balance per books. All errors made by the depositor are reconciling items in determining the
adjusted cash balance per books. In contrast, all errors made by the bank are reconciling items in
determining the adjusted cash balance per the bank.

Step 4 Bank memorandum: Trace bank memoranda to the depositor’s records. List in the
appropriate section of the reconciliation schedule any unrecorded memoranda.

 CM (credit memo) increases or credits to the account

 DM (debit memo) decrease or debits to the account
For example, the company would deduct from the balance per books a Br. 25 debit memorandum
for bank service charges. Similarly, it would add to the balance per books Br. 50 of interest
earned.
Step 5 Service Charges: Service charges may have been deducted by the bank. Such charges are
usually not known to the company before the issuance of bank statement.

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Step 6 Interest Income: If any interest income has been earned by the company on its bank
account, it is not usually entered in company's cash account before the issuance of bank statement.
Step 7 NSF Checks: These are the checks deposited by the company in the bank but are not paid
when the bank presents them for payment.
Bank reconciliation format

Company name
Bank Reconciliation
For the month -------------
Balance per Bank-------------------------------------------------------- ------- xxx

Add: -Deposit in transit-------------------------------- xx

 Deposit error -------- --------------------------xx
 Check error -------------------------------------xx
Total ------------------------------------------------------------------------------xxx
Less: - Check outstanding ------------------------------- xx
 Deposit error--- ---- ----------------------------xx
 Check error -------------------------------------xx
Total ---------------------------------------------------------------------------- (xxx)
Adjusted Bank Balance ----------------------------------------------------- xxx
Balance per Deposit---------------------------------------------------- ------- xxx
Add:-credit memo
Account receivable - ---------------------------xx
Interest Revenue------------------------------ -xx
 Deposit error ----------------------------- --- - xx
 Check error -------------------------------- --- xx
Total ----------------------------------------------------------------------------xxx
Less:-debit memo
Not sufficiency Fund (NSF) -----------------xx
Service charge ---------------------------------xx -
Collection Fee-----------------------------------xx
Collection printing cost------------------------xx
 Deposit error -------- - -------------------------xx
 Check error ---------- -------------------------xx
Total ----------------------------------------------------------------------- (xxx)
Adjusted Depositor Balance ----------------------------------------------- xxx

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 Example1: ABC's Company bank statement dated Dec 31, 2011 shows a balance of Br.
24,594.72. The company's cash records on the same date show a balance of Br. 23,196.79.
Following additional information is available:
a) Following checks issued by the company to its customers are still outstanding:
No. 846 issued on Nov 29 Br. 320.00
No. 875 issued on Dec 26 Br. 49.21
No. 878 issued on Dec 29 Br. 275.00
No. 881 issued on Dec 31 Br. 186.50
b) A deposit of Br. 400.00 made on Dec 31 does not appear on bank statement.
c) An NSF check of Br. 850 was returned by the bank with the bank statement.
d) The bank charged Br. 50 as service fee.
e) Interest income earned on the company's average cash balance at bank was Br. 1,237.22.
f) The bank collected a note receivable on behalf of the company. Amount received by the bank on
the note was Br. 550. This includes Br. 50 interest income. The bank charged a collection fee of
Br. 10.
g) A deposit of Br. 430 was incorrectly entered as Br. 340 in the company's cash records
Task 1: prepare bank reconciliation statement
Task 2: Record all necessary journal entries

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Solutions: task 1

ABC Company
Bank Reconciliation
December 31, 2011
Balance as per Bank, Dec 31 24,594.72
Add: Deposit in Transit 400.00
24,994.72
Less: Outstanding Checks:
No. 846 issued on Nov 29 320.00
No. 875 issued on Dec 26 49.21
No. 878 issued on Dec 29 275.00
No. 881 issued on Dec 31 186.50 (830.71)
Adjusted cash balance per bank 24,164.01
Balance as per Books, Dec 31 23,196.79
Add: Interest Income from Bank 1,237.22
Note Receivable Collected by Bank 500.00
Interest Income from Note Receivable 50.00
Deposit error 90.00 1,877.22
25,074.01
Less: NSF check 850.00
Bank Service Fee 50.00
Bank Collection Fee 10.00 (910.00)
Adjusted cash balance per books 24,164.01
Task 2: Prepare any required journal entries for the ABC Company.
Cash--------------------------- 550
Note receivable -------------------------500

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 Interest income --------------------------50
To record n/r & interest collected by bank.
Bank services expenses---------50
Bank collection expenses------10
Cash---------------------60
To record bank charge
Account receivable-------------- 850
Cash----------------------------------850
To put NSF back in to account receivable.
Example 2: On April 30, the bank reconciliation of Gabe Lewis Company shows three
outstanding checks: no. 254, Br. 650; no. 255, Br. 820; and no. 257, Br. 410. The May bank
statement and the May cash payments journal show the following.
Bank Statement
Checks Paid
Date Check No, Amount
5/4 254 650
5/2 257 410
5/17 258 159
5/12 259 275
5/20 261 500
5/29 263 480
5/30 262 750
Cash Payments Journal
Checks Issued
Date Check No, Amount
5/2 258 159
5/5 259 275
5/10 260 890
5/15 261 500

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 5/22 262 750
5/24 263 480
5/29 264 560
Instructions: List the outstanding checks at May 31.
Solution:
To determine the outstanding checks at May 31, we need to consider the checks issued but not
yet cashed as of that date.
The outstanding checks at May 31 are:
- No. 255: $820
- No. 260: $890
- No. 264: $560

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 Self-check -I
Part –I: Choose the Best answer from the given alternatives

1. Which of the following is an example of a non-cash document?

a) Sales receipt
b) Credit card statement
c) Cash register tape
d) Bank deposit slip
2. What is the purpose of collecting and calculating cash and non-cash documents?
a) To record sales accurately
b) To reconcile cash and non-cash transactions
c) To determine profit margins
d) To prepare financial statements
3. Recording records of individual taking involves:
a) Tracking employee attendance
b) Monitoring inventory levels
c) Documenting individual sales transactions
d) Calculating payroll expenses

4. Cash registers and point-of-sale systems are only used for recording cash transactions.

a) True
b) False
5. Which of the following is a method for collecting cash and non-cash documents?
a) Electronically scanning receipts
b) Counting cash manually
c) Recording transactions on a ledger
d) Calculating sales tax

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 Part II: Give Short Answer

1. How is cash maintained in a safe box?

_________________________________________________________________________
_________________________________________________________________________
2. How are cash transactions recorded?
_________________________________________________________________________
_________________________________________________________________________
3. What is the purpose of proofing regular cash transactions?
_________________________________________________________________________
_________________________________________________________________________
4. When is cash counted at the close of business?
_________________________________________________________________________
_________________________________________________________________________
5. Why is it important to investigate and correct discrepancies in cash counting?
_________________________________________________________________________
_________________________________________________________________________
6. How is cash maintained within the organization budget?
_________________________________________________________________________
_________________________________________________________________________

Part III: Demonstration

1) Identify whether each of the following items 1 through 10 affects the bank side or the book
side of bank reconciliation.

1. Bank service charges

2. Outstanding Checks

3. Deposits in transit

4. NSF check

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 5. Interest on a checking account

6. The bank incorrectly recorded a check for ETB9.58. The company properly
wrote the check for ETB95.80.

7. The bank printed checks for the depositor for a fee.

8. Bank debit memorandum

9. Bank credit memorandum

10. The bank collected a ETB1,000 note for the depositor.

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 Operation sheet: I
Purpose: the purpose of the operation sheet is to show all necessary conditions and steps in
using bank reconciliation.

Equipment Tools and Materials: pen, paper, scientific calculators

Procedure:

Step 1: Deposits in transit

Step 2 Outstanding checks
Step 3 Errors
Step 4 Bank memorandum
Step 5 Service Charges
Step 6 Interest Income
Step 7 NSF Checks
Illustration: The following information pertains to Family Video Company.

1. Cash balance per bank, July 31, ETB7,263.

2. Cash balance per books, July 31, ETB7,284.
3. July bank service charge not recorded by the depositor ETB28.
4. Deposits in transit, July 31, ETB1,500.
5. Bank collectedETB900 note for Family in July, plus interest ETB36, less fee ETB20.The
collection has not been recorded by Family, and no interest has been accrued.
6. Outstanding checks, July 31, ETB591.

Lap Test
a) Prepare bank reconciliation at July 31,2012.
b) Journalize the adjusting entries at July 31,2012 on the books of Family Video Company.

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 Unit Two: Operating POS machine
This unit is developed to provide you the necessary information regarding the following content
coverage and topics:
 Terminal balances.
 Terminal information.
 Security policies and procedures.
This unit will also assist you to attain the learning outcomes stated in the cover page.
Specifically, upon completion of this learning guide, you will be able to:
 Perform terminal balances.
 Record terminal information.
 Follow security policies and procedures.

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1.1. Terminal Balances
Terminal value (TV) is the value of an asset, business, or project beyond the forecasted period
when future cash flows can be estimated. Terminal value assumes a business will grow at a set
growth rate forever after the forecast period. Terminal value often comprises a large percentage
of the total assessed value.

Performing terminal balances is a process of reconciling the transactions and cash in a terminal
to ensure accuracy and completeness. To remove receipts from a terminal, follow these steps:
 Gather the necessary tools: You will need cash handling manual or guidelines provided
by your organization, a calculator, and a pen or pencil.
 Start with the opening balance: Record the beginning cash balance at the start of the
day. This should include any change left from the previous shift or from the cash office.
 Keep track of all sales: Record each sale or transaction accurately, including cash, credit
card, and any other forms of payment.
 Check for voided transactions: Look for voided or cancelled transactions and make
sure they are correctly recorded.
 Count the cash: Depending on your organization's procedures, count the cash in the
terminal periodically throughout the day or at the end of the shift. Use a calculator to
keep an accurate count.
 Compare cash and sales: Reconcile the cash count with the total amount of sales
recorded in the terminal. If there are any discrepancies, investigate them immediately to
identify any errors or possible theft.
 Remove receipts: At the end of the shift, remove all the receipts from the terminal and
store them in a designated location according to your organization's policies. This may be
a cash office or a secure safe.
 Prepare a closing balance: Calculate the final cash balance after removing all receipts.
This balance should match the amount left in the terminal and any additional cash
collected during the shift.

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  Document your findings: Make sure to document the cash count, sales total, any
discrepancies, and any notes or comments related to the terminal balance.
 Follow reporting procedures: If there are significant discrepancies or unusual findings,
report them to the appropriate personnel or manager according to your organization's
protocols.

1.8.1 Organization policies and procedures

Organization policies and procedures are a set of guidelines and rules that govern the way an
organization operates. They provide a framework for employees to follow and ensure
consistency, efficiency, legality, and ethical behaviour within the organization.

Organization policies and procedures related to removing receipts from a terminal would
typically include guidelines on how to handle receipts, ensure their proper disposal or storage,
and maintain confidentiality of customer information. These policies may cover the following
aspects:

Organization policies may cover the following aspects:

 Receipt removal process: The organization may have specific procedures in place for
removing receipts from the terminal, such as instructions on when and how often to remove
them.
 Security measures: Policies may outline security measures to protect the receipts from
unauthorized access or tampering. This may include password protection, encryption, or
physical security measures.
 Storage or disposal: Organizations may state whether hard copy receipts should be stored
securely or properly disposed of. This might involve shredding paper receipts or securely
deleting digital copies.
 Retention period: Policies may specify the duration for which receipts need to be retained
before they can be safely discarded.
 Data privacy: Procedures may emphasize the importance of maintaining customer
confidentiality and ensuring that personal information obtained from receipts is processed
and stored in compliance with relevant data protection regulations.
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1.2. Terminal Information
Recording information means the information added to a document at the time such document is
recorded, including but not limited to, the date and time of receipt of such document for
recording, the name and municipality of the recording officer, and the book and page of such
document or other suitable indication of its location.

Recording terminal information typically involves capturing relevant details about a specific
terminal, such as its location, maintenance history, and any issues encountered. This process
helps keep track of terminal operations, identify patterns or recurring problems, and facilitate
troubleshooting if needed.
Categories Records
1. Official record
 Records having the legally recognized and judicially enforceable quality of
establishing some fact, policy, or institutional position or decision
 The single official copy of a document maintained on file by an administrative unit of
the University which is usually, but not always, the original.
 Subject to the records retention requirements included in the Records Management
Program and Retention Schedule.
2. Transitory/convenience record
 Duplicate copies of official records.
 Extra copies of documents or records created or preserved for convenient access
and/or for reference, including computer backups and duplicate computer files.
(See University of Iowa IT Backup and Recovery Policy for specifics on electronic
record backup.)
 Miscellaneous correspondence without official significance.
 versions or drafts of reports, memos, word processing files, letters, messages, or
communication (electronic or otherwise) that are used to develop a final official
document.

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  Records that do not carry a requirement for retention and should be destroyed when
they cease to be useful (using secure destruction methods if they contain confidential
information).

General steps of removing receipts from a terminal

To remove receipts from a terminal, the specific steps may vary depending on the type of
terminal involved (e.g., point-of-sale machine, ATM). However, here are some general steps that
can be followed:

A. Identify the terminal: Make sure you know which terminal you are working with,
especially in cases where multiple terminals are present.
B. Power off the terminal: Before removing any receipts, it's important to turn off the
terminal properly to avoid any potential data loss or damage.
C. Access the receipt storage area: Locate the compartment or slot where the receipts
are stored. This can vary based on the terminal model.
D. Remove the receipts: Carefully take out the receipts from the storage area, making
sure not to damage or tear them.
E. Store the removed receipts: Depending on the organization's policies or regulations,
you may need to store the removed receipts in a designated location for a certain
period. This is often done for record-keeping or auditing purposes.
F. Verify completion: Confirm that all receipts have been successfully removed from
the terminal and the storage area is empty.

Keep in mind that these steps are general guidelines, and the specific procedure for removing
receipts from a terminal may differ based on the manufacturer's instructions or company
protocols.

2.3. Security of policies and procedures

Following security policies and procedures is crucial for ensuring the safety and confidentiality
of sensitive information. In this specific scenario, "Remove receipts from terminal" refers to a
security policy or procedure related to handling receipts at a terminal or point-of-sale system. It

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typically involves removing printed receipts from the terminal after a transaction has been
completed.

By promptly removing receipts, you can help prevent unauthorized access to customers' payment
information and minimize the risk of fraud or identity theft. This practice also maintains the
cleanliness and organization of the terminal area.

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Self-check –II
Part I: Say True or False

1. Convenience records are duplicate copies of official records.

2. Security policies and procedures are not crucial for ensuring the safety and confidentiality of
sensitive information.
3. Power off the terminal is known as before removing any receipts.
Part II- Choose the Best answer from the given alternatives
1. Which of the following is a part remove receipts from terminal?
a) Perform terminal balances
b) Record customer information
c) Evaluate marketing strategies
d) Update inventory database
2. What is the purpose of performing terminal balances?
a) To remove receipts from the terminal
b) To record customer information
c) To evaluate marketing strategies
d) To ensure all transactions are accurate and accounted for
3. Which of the following best describes organization policies and procedures?
a) Guidelines for recording terminal information
b) Instructions for following security policies
c) Steps for removing receipts from the terminal
d) Rules for updating inventory database
4. Which unit involves recording terminal information?
a) Organization policies and procedures
b) Recording terminal information
c) Following security policies and procedures
d) None of the above
5. Why is it important to follow security policies and procedures when removing receipts from
the terminal?
Ministry of Labor and Version -1
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 a) To maintain confidentiality of customer information
b) To optimize marketing strategies
c) To ensure accurate inventory balance
d) To improve the recording of terminal information
Part III- Short Answer
1. What is the purpose of performing terminal balances?
2. What are organization policies and procedures regarding terminal balances?
3. Why is it important to record terminal information?
4. What are security policies and procedures related to terminal management?

Ministry of Labor and Version -1

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 References:
Jerry J. Weygandt, Paul D. Kimmel and Donald E, Kieso Accounting Principles, 10 th
edition, 2012

FESS. WARREN, Accounting Principles, 16th edition,

"Cash Management Handbook: A Guide for Financial Planning and Control" by John Tennent
and Lesley Alborough
Steven M. Bragg, Corporate Cash Management, 2nd edition, 2014

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 Developers’ profile
N Name Qualificati Educational Region College Mobile E-mail
o on background number
1 Kassa Terefe MA Accounting & A.A. Kirkos 099329830 [email protected]
Gelaw Finance Manufacturing 1
College
2 Remedan MBA Accounting & A. A. GENERAL 093323393 [email protected]
Abdurehman Finance WINGET PTC 9
3 Sewumehon MSC Accounting & A. A Kirkos 094803212 sewumehonanteneh@gmai
Anteneh Finance Manufacturing 6 l.com
College
4 Aynabeba Zewdie MA Accounting Oromy Sebeta Polytechnic 091172488 Aynabebazewdie81@gmai
&Finance a College 1 l.com
5 Ejigu Terefe MA Accounting Oromy Burayu PTC 091344047 [email protected]
&Finance a 8
 Ministry of Labor and Version -1
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