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Key Terms - Chapter 6

Key Terms - Chapter 6 - Principles of internal control...

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Principles of internal control include: 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. Bank Statement Balance Add: Deposits in transit. Deduct: Outstanding checks. Add or Deduct: Bank errors. Book Balance Add: Collections made by the bank. Add: Interest earned on checking account. Deduct: Nonsufficient funds check (NSF). Deduct: Bank service charge. Add or Deduct: Book errors. Bank Reconciliation- Report that explains the difference between the book (company) balance of cash and the cash balance reported on the bank statement. Bank statement- Bank- report on the depositor's beginning and ending cash balances, and a listing of its changes, for a period. Canceled checks- Checks that the bank has paid and deducted from the depositor's account. Cash- Includes currency, coins, and amounts on deposit in bank checking or savings accounts. Cash equivalents- Short-term, investment assets that are readily convertible to a known cash amount or sufficiently close to their maturity date (usually within 90 days) so that market value is not sensitive to interest rate changes.
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