Chapter 6 - Chapter 6 Class Notes Internal Control and...

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Service, Merchandising, & Manufacturing Operations ____________________ sell services rather than physical goods, so their income statements show costs of services rather than cost of goods sold. ____________________ sell goods that been be obtained from a supplier. _______________ sell directly to consumers, whereas ___________________ sell to retail companies. ____________________ sell goods that they have made themselves. Internal Control A variety of procedures and policies. This concept is broad – we only briefly discuss. Common principles of Internal Control: (see Exhibit 6.2) 1. Establish responsibility 2. Segregate duties 3. Restrict access 4. Document procedures 5. Independently verify Internal Control Manual Chapter 6 Class Notes Internal Control and Financial Reporting for Cash and Merchandising Operations Compiled by: Janice H. Fergusson, CPA Certain Materials used with permission of The McGraw-Hill Companies, Inc.
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ACCT 225 – Fall 2008 Page 2 of 9 Chapter 6 Controlling and Reporting Cash Effective controls over Cash: 1. Cash handling segregated from cash recordkeeping. 2. Cash receipts promptly (daily) deposited in bank. 3. Cash disbursements made by check. 4. Bank reconciliation. Bank reconciliation identifies differences between the book balance for and the cash in the bank account. Let’s Practice - In-Class Handout Your bank may not know about . . . You may not know about . . . Errors made by the bank. Interest the bank has put into your account. Time lags: Service charges taken out of your account. Deposits that you made recently. Customer checks you deposited but that bounced. Checks that you wrote recently. Errors made by you.
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Until a few years ago, periodic inventory systems were commonly used because perpetual systems were too costly to implement, but with today’s technology it’s
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Chapter 6 - Chapter 6 Class Notes Internal Control and...

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