2019 WAEC Accounts – Principles of Accounts Theory (a) Outline three reasons for which a cheque would be dishonored. (b) Explain the following…

Explanation

(a) The reasons for which a cheque would be dishonoured are:

i. Insufficient funds in the drawer's account;

ii. Irregular signature of the drawer;

iii. Omission of the date on the cheque

iv. When the amount in the figure differs from the amount in words,

v. If there is any alteration that is not endorsed

vi. When the cheque is stale;

vii. If the cheque is not signed by the drawer,

viii. When a post-dated cheque is presented for payment before the due date,

ix. When the bank is notified about the death of the drawer.

x. When the drawer directs the bank not to honour the cheque.

xi. When the bank is notified about the insanity of the drawer.

(b) i. Petty cash float: It is the maximum amount a petty cashier is allowed to hold at any point in time for the payment of minor expenses.

ii Contra entries: These are entries that are recorded on the opposite sides of an earlier entry to reverse or offset their effects on their account balances. OR, they are entries made for transactions whose debits and credits are in the same book.

i. Imprest system: This is a system whereby a fixed amount of money is given to a petty cashier for the payment of minor expenses and he is reimbursed with the amount disbursed over a period of time.

(c) The advantages of keeping petty cash book Using imprest system are:

i. lt saves the main cashier's time so as to Concentrate on larger disbursements

ii. It provides a training opportunity for young and inexperienced cashiers that enables them to take up higher cash responsibilities.

iii. It provides support for internal checks/detection of errors

iv. It minimizes delays in cash disbursements

v. It reduces the burden on the main cashier

vi. It enables the petty cashier to analyse expenditures as they occur

vii. It decongests the main cashbook

viii. It helps to classify petty expenses for easy identification