T8 notes

T8 notes - Chapter 8: Cash and Internal Control 1. Internal...

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1 Chapter 8: Cash and Internal Control 1. Internal control: monitor and control business activity 2. Use of IT in internal control and its related problems You may read the textbook for the details of the mechanism. These topics will be discussed in greater details in the course of Auditing or Accounting Information System. *3. Control of Cash Definition of cash (TB319): - cash cash equivalent (readily convertible to a cash amount + due date within 3 months) Cash receipts: one of the highest risks of a retail company involving high cash sales (example: fast food shop) Cash disbursements: voucher system (keeping of invoices) Petty cash system (also called petty cash book): a subsidiary fund from the main cash / bank account (a fixed fund) Minor cash payment Reimbursement to the original limit after a certain time period (1-week, 2-week or 1-month) ***** Bank Reconciliation Statement Comparing OUR OWN RECORDS in the bank account WITH the bank statement (the bank’s record of our own bank account) A bank reconciliation statement explains the difference existed between our own record and the information on the bank statement (NOT NECESSARILY ERROR!) Read demonstration problem 1 (TB332) for Bank reconciliation statement preparation and problem 2 (TB334) for petty cash fund A note on terminology: canceled check (check payment cleared by the bank; HK: cleared cheque) Fully worked example (Problem 8-4B) Analysis of Information (b) Unpresented check ($1800 + $892 + $2568) (c) Firm’s error (+90) (d) Cash account (-$795 NSF -$10 bank charges both will be charged to Millard Industries, our
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T8 notes - Chapter 8: Cash and Internal Control 1. Internal...

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