Term
| Why do companies have internal controls? |
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Definition
1. Safeguard assets
2. Encourage adherence to company policies
3. Promote operational efficiency
4. Ensure accurate and reliable accounting records |
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Term
| What is the "Assignment of responsibilities" internal control? |
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Definition
| Each employee is assigned certain responsibilities. Ex: A company has a controller who might be responsible for approving invoices (bills) for payment, However, it is the treasurer who may actually sign the checks. |
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Term
| What is the "Proper authorization" internal control? |
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Definition
| An organization generally has rules that outline approved procedures. Any deviation from standard policy requires proper authorization. |
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Term
| What is the "Supervision Of Employees" internal control? |
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Definition
| All employees, no matter what their position, need supervision. |
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Term
| What is the "Separation of duties" internal control? |
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Definition
| It divides responsibilities for transactions between two or more people. |
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Term
| What is the "Internal And External Audits" internal control? |
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Definition
| An audit is an examination by an outside party. In accounting, an auditing firm examines the company's financial statements, accounting systems, and internal controls. Through looking at these statements, they can determine if something fishy is going on. |
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Term
| What is the "Documents and records" internal control? |
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Definition
| Documents should be prenumbered. A gap in the numbered sequence points to a missing document. Also, prenumbering cash-sale receipts discourages theft by cashiers. |
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Term
| What are the "Electronic and computer internal controls?" |
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Definition
| This can be anything from electronic tags on merchandise that are set off if someone tries to leave the store with them to security cameras and alarms. |
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Term
| What are "other internal controls?" |
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Definition
| These can be many things. For example, taking the cash to the bank periodically throughout the week opposed to on only one day. |
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Term
| Deposits in Transfer (Outstanding deposits) |
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Definition
| Checks that a business has deposited and recorded to the books, but for whatever reason, the bank hasn't added the deposit yet. |
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Term
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Definition
| Checks that the company has written to others and deducted from the books, but for whatever reason, the bank hasn't deducted them from the bank balance yet. |
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Term
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Definition
| If a deposit is made to the business's bank account directly and the business isn't aware of it. The business must add this value to their books. |
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Term
| Electronic Funds Transfers (EFT's) |
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Definition
| When the bank pays or receives cash on behalf of the depositor. |
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Term
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Definition
| A charge from the bank. It must be deducted from the books. |
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Term
| Interest revenue earned on checking account |
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Definition
| Depositors earn interest if they keep a large enough balance of cash in their account. Interest revenue earned on checking account is added to the book balance. |
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Term
| Nonsufficient funds (NSF) checks |
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Definition
| A check received from a customer who doesn't have enough money in their account. These checks are deducted from the book balance. |
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Term
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Definition
| Companies keep a small amount of cash on hand to pay minor amounts. It's basically cash that is kept on hand for various fees. Ex. Have to pay the fed ex guy...or you're buying lunch for the whole business. |
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Term
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Definition
| When you take something off of the books. |
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