Chapter 6 Notes-Bank Reconciliation

Chapter 6 Notes-Bank Reconciliation - Cash and Internal...

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Cash and Internal Controls Purpose of Internal Control -Internal Control system- consists of policies and procedures managers use to 1. protect assets 2. ensure reliable accounting 3. promote efficient operations 4. urge adherence to company policies -Managers place a high priority on internal control systems because they can prevent avoidable losses, help managers plan operations, and monitor company and employee performance. - The principles of internal control- establish responsibilities - maintain adequate records - insure assets and bond key employees - separate recordkeeping from custody of assets - divide responsibility for related transactions - apply technological controls - perform regular and independent reviews Limitations of Internal Control 1. The Human Element 2. Cost benefit principle- Costs of internal controls cannot exceed their benefits Cash over and short- -Cash over and short account is an income statement account recording the income effects of cash overages and cash shortages. Cash over and short account usually has a debit balance at the end of the accounting period.
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Chapter 6 Notes-Bank Reconciliation - Cash and Internal...

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