Financial Accounting Chapter 7 Notes
Financial Accounting Chapter 7 Notes ACC-142
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This 2 page Class Notes was uploaded by bauer47 Notetaker on Wednesday March 2, 2016. The Class Notes belongs to ACC-142 at Iowa Central Community College taught by DawnA. Humburg in Fall 2015. Since its upload, it has received 26 views. For similar materials see Financial Accounting in Accounting at Iowa Central Community College.
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Date Created: 03/02/16
Ch 7 Internal Control and Cash 1. What is internal control? Prevents shrinkage (inventory and assets) a. CRIME: i. C > control procedures; count inventory, security ii. R > risk assessment; hire a shoplifter, find the vulnerable points (places in the store) iii. I > information systems; inventory systems (perpetual vs periodic), proper authorization for transactions iv. M > monitoring controls; CFO (chief financial officer), CEO, management; hire theft prevention specialist, put them beepers in there, tags, security cameras, count your inventory more often v. E > environment; owner, management; if management overrides internal control, morale tanks, employees are angry b. What is collusion? Working together to reach a common goal relating to crime or skirting internal control; Enron; the SEC enacted the Sarbanes Oxley Act of 2002 (SOX) 2. Parties to a check or debit card: a. Payee > receives the cash b. Maker > person writing the check or presenting the debit card; they make the transaction happen c. To open an account, you sign on an electronic tablet d. Debit cards > if you pay with a debit card, you may have a temporary charge; always keep your receipt!!!! 3. Petty cash fund > a small fund used for miscellaneous expenses; locked; one person should have access (only one person); how much should be in the fund? Depends on the business a. Establish a petty cash fund: i. DR Petty Cash (+CA) 1,000 CR Cash (-CA) 1,000 b. At the end of the month, replenish the fund: i. Expenditures: $100 postage, $200 shipping, $500 libations (booze); there is $175 left Postage Exp. 100 FOB destination: Delivery Exp. 200 OR FOB shipping point: A/R 200 Entertainment Exp. 500 Cash Short and Over 25* (if this account is debited, it is considered an expense; credited it is a revenue) Cash (-CA) (1000 – 175) 825 4. Bank Reconciliation > reconcile your bank statement (or online) with what we have a. Two sections: i. Per bank > these items are items that we have record of but the bank doesn’t (look at the bank statement and compare); most of these items are timing differences; outstanding checks, deposit in transit, bank errors, Ending bank statement balance + deposits in transit – checks outstanding -/+ bank errors = adjusted cash balance ii. Per book > these are items that the bank has record of but we don’t (due to timing) Ending book balance (check register) + interest income, collection of notes receivable and related interest, book errors – bank fees, bounced or bad checks from our customers (bad DR transaction), book errors = adjusted cash balance
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