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| the process of comparing the bank's account balance with the company's balance, and explaining the differences to maket hem agree |
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| a statement received monthly from the bank that shows the depositor's bank transactions and balances |
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| obtaining insurance protections against theft by mployees |
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| resources that consist of coins, currency checks, money orders, and money on hand or on deposit in a bank or similar depository. |
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| a projections of anticipated cash flows, usually over a one- to to-year period |
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| short-term, highly liquid investments that can be converted to a specific amount of cash |
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| deposits recorded by the depositor that have not been recorded by the bank |
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| electronic funds transfer (EFT) |
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Definition
| a disbursement system that uses wire, telephone, or computer to transfer cash from one location to another. |
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| a dishonest act by an employee that results in personal benefit to the employee at a cost to the empoyer |
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| the three factos that contribute to fraudulent activity by employees: opportunity, financial pressure, and rationalization |
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| company employees who continuously evaluate the effectiveness of the company's internal control systems |
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| all the related methods and measures adopted within an organization to safeguard its assets and enhance the reliability of its accounting records, increase efficiency of operations, and ensure compliance with laws and regulations |
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| a check that is not paid by a bank because of insufficient funds in a bank account |
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| checks issued and recorded by a company that have not been paid by the bank |
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| a cash fund used to pay relatively small amounts |
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| ash that is not available for general use, but instead is restricted for a particular purpose |
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Term
| sarbanes-oxely act of 2002 |
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Definition
| law that requires companies to maintain adequate systems of internal control |
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Definition
| employee responsible for the management of a company's cash |
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Definition
| an authorization form prepared by each expenditure in a voucher system |
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| a network of approvals by authorized individuals acting independently to ensure that all disbursements by check are proper |
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Term
| define fraud and internal control |
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Definition
| a fraud is a dishonest act by an employee that results in personal benefit to the employee at a cost to the employer. The fraud triangle refers to the three factos that contribute to fraudulent activity by employees: opportunity, financial pressure, and rationalizations. Internal controle consiss of all the related methods and measures adopted within an organization to safeguard its assets, enhance the reliability of its accounting records, incrase efficiency of operations, and ensure compliance with laws and regulations |
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Term
| identify the principles of internal control activities |
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Definition
| the principles of internal control are: establishment of responsibility; segregation of duties; documenttion procedures; physical controls; independent internal verifications; and human resource controls |
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Term
| explain the applications of internal control principles to cash receipts |
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Definition
| internal controls over cash receipts include: (a) designating only peronnel such as cashiers to handle cash; (b) assigning the duties of receiving cash, recording cash, and having custody of cash to different individuals; (c) obtaining remittance advices for mail receipts, cash register tapes for over-the-counter receipts, and deposit slips for bank deposits; (d) using company safes and bank vaults to store cash with access limited to authorized personnel, and using cash registers in executing over-the-conter receipts; (e) making independent dailyy counts of register receipts and daily comparisons of total receipts with total deposits; and (f) bonding personnel who handle cash and requiring them to take vacations. |
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| explain the applications of internal control to cash disbursements |
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Definition
| internal controls over cash disbursements include: (a) having only specified individuals such as the treasurer authorized to sign checks; (b) assigning the duties of approving items for payment, paying the items, and recording ht payments to diffferenct individuals; (c) using prenumbered checks and accounting for all checks, with each check supported by and approved invoice; after payment, stamping each approved invoice "paid"; (d) storing blank checks in a safe or vault with access restricted to authorized personnel, and using a machine withh indelible ink to imprint amounts on checks; (e) comparing each check with the approved invoice before issuing the check, and making monthly reconciliations of bank and boook balances; and (f) bonding personnel who handle cash, requiring employees to take vacations, and conducting background checks |
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Term
| prepare a bank reconciliations |
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Definition
| in reconciling the bank account, it is customary to reconcile the balance per books and balance per bank to their adjusted balance. The steps reconciling the cash accounts are to determine deposits in transit, outstanding chekcs, errors by the depositor or the bank, and unrecorded bank memoranda. |
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Term
| explain the reporting of cash |
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Definition
| cash is listed first in the current assets section of the balance sheet. Companies often report cash together wiht cash equibalents. Cash restricted for a special purpose is reported separately as a current asset or as a noncurrent asset, depending on when the company expects to use the cash. |
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Term
| discuss the basic principles of cash management |
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Definition
| the basic principles of cash management include: (a) increase the speed of receivables collectsion, (b) keep inventory levels low, (c) delay payment of liabilities, (d) plan timing of major expenditures, and (e) invest idle cash |
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| identify the primary elements of a cash budget |
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Definition
| the three main elements of a cash budget are the cash receipts section, cash disbursements section, and financing section |
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Term
| explain the operations of the petty cash fund |
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Definition
| in operating a petty cash fund, a company establishes the fund by appointing a custodian and determining the size of the fund. The custodian makes payments form the fund for documents expenditures. The company replenishes the fund as needed, and at the end of each accounting period. Accounting entries to record payments are made each time the fund is replenished. |
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Term
| establishment of responsibility |
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Definition
control is most effective whe only one person is responsible for a given task.
EX) at a grocery store, the clerk behind the counter is the only one who has access to his drawer and then when his shit is over he takes his OWN drawer to be counted before going home at night so that there is no mistaking who should take responsibility for the problem |
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Term
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Definition
!) different individuals should be responsible for related activites
2) the responsibility for record-keeping for an asset should be separated from the physical custody of that asset.
ex) the personnel that design and program computerized systems should not be assigned duties related to day-to-day use of the system. Otherwise, they could design the system to benefit them personally and conceal the fraud through day-to-day use.
ex) make the salespeople make the sale; the shipping department ships the goods and he billiong department prepare the sales invoices |
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Term
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Definition
1) prenumbered documents, and all documents should be accounted for
2) promptly forward source documents for accounting entires to the accounting department. |
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Term
| independent internal verification |
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Definition
1) companies should verify records periodically or on a surprise basis
2) an employee who is idependent of the personnel responsible for the information should make the verification
3) discrepancies and exceptions should be reported to a management level that can take appropriate corrective action |
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Term
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Definition
1) bond employees who handle cash
2) rotate employees duties and require employees to take vacations |
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