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LECTURE NOTES FOR CHAPTER 8 Chapter 8 deals with several topics: The Sarbanes Oxley Act, (known as SOX), internal control, reconciling a bank statement, and the petty cash fund. You are not going to college to learn how to maintain a petty cash fund (The book calls it “Special Purpose Cash Fund, discussed on page 371) so SKIP THAT TOPIC. SOX and internal control are strictly “read and remember” topics. There is nothing there for me to explain or for you to understand. It is simply, I repeat, “Read and remember”. To make sure the material did in fact, soak in, I encourage you to answer the following questions at the end of the chapter: EX. 7,8,9,10,11,and 18. After you have answered those questions, compare your answers to the answers that I have posted in the “Course Documents” section. THIS IS A SUGGESTION, NOT A REQUIREMENT. Do not send me your answers; they are strictly for your benefit. Therefore, all that is left for me to cover in these notes is the bank reconciliation. This should be a very simple topic because most of you reconcile your own bank statement every month (don’t you) and reconciling the bank statement of some huge company is done the same way that you reconcile your own bank statement. Just between you and me, I feel silly asking a class full of adults to read about how to reconcile a bank statement because I’m betting you already know how, but my boss says we have to cover the topic, so cover it we shall. Should be a bunch of easy points on the quiz/exam. Before we start the bank reconciliation, here are some odds and ends that you must BE SURE to learn: 1. Cash- You probably think you know what cash is, but do you know the accounting definition? Read the bottom of page 360 to be sure. 2. EFT-Top of page 364 3. Voucher – Bottom of page 363 4. On page 373, study: cash equivalents, line of credit, and compensating balance. Now, back to the bank reconciliation. Once upon a time, the Cash account in our company’s ledger said that that we had $241 in the bank. The Cash account appeared as follows: Cash 313 222 300 200 50 _______________ 663 422 241 However, when we received the bank statement, the bank said we only had $81 in the bank. Obviously, the big blockbuster question is “Which number is correct?” In all probability, neither number is correct! This is due to the fact that probably there is some information that the company has about the account that the bank doesn’t have yet, and probably, the bank has information about the account that the company doesn’t have yet.
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Once all these “missing pieces” are laid out on the table and both parties have all the information, we’ll probably find that neither number is correct. In order to answer the question “How much money do we actually have?” we’re gonna go through a little
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This note was uploaded on 06/20/2011 for the course ACT 2291 taught by Professor Leedaniel during the Summer '09 term at Troy.

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