Chapter 4 - Chapter 4: Internal Control & Cash Dr. Ron...

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Chapter 4 Page 1 Dr. Ron Lazer 1 Chapter 4: Internal Dr. Ron Lazer Fall 2009 Financial Accounting GAAP (Generally Accepted Accounting Principles) The Accounting Information System Financial Statements Balance Sheet Ron Lazer, Ph.D.
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Chapter 4 Page 2 Dr. Ron Lazer Chapter 4 – Book Reading s I’ll cover Cash, Cash Reconciliation and Petty Cash in class. s Please read the rest of the chapter, it is part of the material covered by the exam. Cash s Cash is the first asset listed in the current asset section of the balance sheet. s It consists of coin, checks, and bank drafts received by the company. s The only reporting issues for cash is whether there are restrictions on its use. s Many companies combine cash and cash equivalents on their balance sheets. b Cash equivalents - highly liquid short- term investments that can easily and quickly be converted into cash Ron Lazer, Ph.D.
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Chapter 4 Page 3 Dr. Ron Lazer Management of Cash s Managers spend much time managing cash for several reasons. b Although cash balances may be small at any one time, the flow of cash can be enormous. b Because cash is the most liquid asset, it is enticing to thieves and embezzlers. b Adequate cash is essential to the smooth functioning of operations. b Cash itself does not earn income. It is important not to hold excess cash; it should be invested. Ron Lazer, Ph.D. Management of Cash s To reconcile a bank statement means to verify that the bank balance for cash is consistent with the accounting records. b
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Chapter 4 - Chapter 4: Internal Control & Cash Dr. Ron...

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