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Week 5 notes

by: Jacob

Week 5 notes ACCT 200 007

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Free notes regarding internal controls, the SOX act, and accounting for the asset cash.
Accounting 200 (ACCT 007 - Izabela Vandeest)
Izabela Maja Vandeest (P)
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This 2 page Class Notes was uploaded by Jacob on Friday September 23, 2016. The Class Notes belongs to ACCT 200 007 at University of Tennessee - Knoxville taught by Izabela Maja Vandeest (P) in Fall 2016. Since its upload, it has received 57 views. For similar materials see Accounting 200 (ACCT 007 - Izabela Vandeest) in Economic Sciences at University of Tennessee - Knoxville.

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Date Created: 09/23/16
Notes September 20th and 22nd Internal controls are in place to prevent business mishaps They: 1. Ensure accurate & Reliable financial reporting. 2. Comply with all laws and regulations. 3. Ensure effective and efficient operations of business. There are 5 elements to maintaining good internal controls. 1. Control environment (What is my business) 2. Risk assessment (What am I risking) 3. Control procedures (what can I do to ensure smooth business operations) 4. Monitoring both employee behavior and accounting system breakdowns 5. Information and communication (feedback) This helps deter potential events that could have adverse impacts to the business, such as fraud. Three categories determine the risk of an event. • Opportunity ( No one checks this. ) Pressure ( I need money. ) • • Rationalization ( I deserve it. ) If all three exist, this is “high risk” Internal controls were forced into place by The SOX Act to regulate publicly-held companies. This act: • Requires companies to maintain effective internal controls. • Requires companies to report effectiveness of these controls. • Imposes criminal penalties for destroying records, tampering with witnesses, or retaliating against whistle blowers. • Created a “watchdog” over auditors, The PCAOB ( Public Company Accounting Oversight Board ), to protect investors. Internal Controls over Cash Receipts are to protect cash inflow. To do this businesses should: • Separate duties when receiving cash ( handling cash and recording amount received ) Use cash short and cash over accountings to highlight differences • between recorded cash sales and actual cash in the drawer. This shows cash over ( other income ) and cash short ( misc. expense ) • Prepare a monthly bank reconciliation. This is to verify the company’s record of cash receipts against the bank’s record of cash receipts. Internal controls over cash disbursements are to protect cash outflow. To do this businesses should: • Separate duties when paying cash. For example, making the payment and recording amount paid should be done by two different people. Use a voucher system that gives written authority for every cash • disbursement. • Use a petty cash fund for small purchases • Prepare a monthly bank reconciliation. (To show/resolve differences between banks cash in/out record and company record) When reporting cash remember cash consists of: Coins, currency, checks, money orders, and money on deposit immediately available. Cash Equivalents are extremely short term investments of cash in: Money market funds, US treasury bills, and money loaned to other corporations Report these as a single figure in current assets.


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