Chapter 4

Chapter 4 - ACG 2021 ACG Financial Accounting Internal...

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ACG 2021 ACG 2021 Financial Accounting Financial Accounting Internal Control and Cash
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Learning Objectives Learning Objectives Understand Internal Control Use a bank reconciliation as a control device Account for Petty Cash Use a budget to manage cash
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Internal Control Internal Control Internal control is an organizational plan plan and related measures that an entity adopts to reach various Goals Goals : Safeguard assets Encourage adherence to company policies Promote operational efficiency Ensure accurate and reliable accounting records
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Failures of Internal Control Failures of Internal Control Enron WorldCom Others Led to Congress Passing Sarbanes- Oxley Act Address Public Concerns over failed Audits of Public Companies Internal Controls at Public Companies
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Bank Accounts as Controls Bank Accounts as Controls All cash should be deposited into a bank account daily. To draw money from the account, a check is written Three parties to a check: maker – signs the check payee – to whom the check is written bank – on which the check is drawn Remittance advice is an optional attachment that gives the reason for the payment.
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Cash Control Definitions Cash Control Definitions Monthly bank statements are sent to the account holder and should be reconciled. to check (a financial account) against another for accuracy ( Webster Online Dictionary ) Electronic fund transfer (EFT) is the electronic transfer of cash. No check is written. Payments on behalf of account holder. Deposits made from customers to account holder. Bank statements include both physical checks and EFT payments as well as other transactions on the account.
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Bank Reconciliation Bank Reconciliation Comparison of: Two independently maintained records of a business’s cash • The company’s Cash account (T-Account, the book balance) • The bank statement Differences between the two records generally arise
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Chapter 4 - ACG 2021 ACG Financial Accounting Internal...

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