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ACC 131 Seipp Week 6 Lecture Notes: 9/21-9/25

by: Daniel Hemenway

ACC 131 Seipp Week 6 Lecture Notes: 9/21-9/25 ACC 131

Marketplace > Illinois State University > Accounting > ACC 131 > ACC 131 Seipp Week 6 Lecture Notes 9 21 9 25
Daniel Hemenway
GPA 3.93
Financial Accounting
Edward Seipp

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I am an Elite Note Taker and I will be posting notes each week, along with study guides for exams for BSC 101 (Helms), ACC 131 (Seipp), and ECO 105 (Goel). Give them a look and refer your friends ...
Financial Accounting
Edward Seipp
Class Notes
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This 4 page Class Notes was uploaded by Daniel Hemenway on Sunday September 27, 2015. The Class Notes belongs to ACC 131 at Illinois State University taught by Edward Seipp in Summer 2015. Since its upload, it has received 50 views. For similar materials see Financial Accounting in Accounting at Illinois State University.


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Date Created: 09/27/15
ACC 131 Seipp 921925 Chapter 4 Internal Control and Cash Role of Internal Control OR Internal Control System Procedures established by management to control employees activities Provide reasonable assurance that the company s objectives are being met in the following three areas Effectiveness and efficiency of operations Reliability of financial reporting Compliance with applicable laws and regulations SarbanesOxley Act Requirements Under the SarbanesOxley Act of 2002 top management of publiclytraded corporations have an increased responsibility for a system of internal controls that ensures the reliability of the financial statements Section 404 of the Act requires management to produce an internal control report acknowledging that management is responsible for establishing and maintaining an adequate internal control system and procedures for financial reporting and also assessing the effectiveness of these controls Section 302 of the Act says that responsibility for internal control is with management Cash Short and Over Over and Short order doesn t matter A control activity that requires that cash receipts be deposited in a bank daily At the end of each day the amount of cash received during the day is debited to the cash accounts to which it has been deposited The amount deposited should equal the total of cash register tapes Cash Over and Short An account that records the discrepancies between deposited amounts of actual cash received and the total of the cash register tape Example Cash 9980 Cash Short and Over 20 Sales 10000 Cash 8030 Sales 8000 Cash Short and Over 30 ACC 131 Seipp 921925 Petty Cash Petty Cash Fund established by the company so it doesn t have to write checks for purchases of small amounts of money A petty cash custodian oversees the fund and also is who both pays for small dollar amounts directly from the fund and reimburses employees who have receipts for items they ve bought with their own money Example Petty Cash 10000 Cash 10000 Parking Expense 400 Misc Expense 500 Office Supply Expense 700 Cash 1600 Reconciliation of Accounting Records to Bank Statements Bank Reconciliation The process of reconciling any differences between a company s accounting records and the bank s accounting records Reconciliation of these separately maintained records serves two purposes It serves a control function by identifying errors and providing an inspection of detailed records that deters theft It serves a transaction detection function by identifying transactions performed by the bank so the business can make the necessary entries in its records In general differences between the cash account balance and the bank statement balance develop from three sources Transactions recorded by the business but not recorded by the bank in time to appear on the current bank statement Transactions recorded by the bank but not yet recorded by the business Errors in recording transactions on either set of records ACC 131 Seipp 921925 Transactions Recorded by the Business But Not Yet Recorded by the Bank There are generally two types of transactions recorded by the business but not recorded by the bank in time to appear on the current statement Outstanding Check A check issued and recorded by the business that has not been cashed by the recipient of the check Cause the bank balance to be higher than the business s cash account balance 0 Deposit in Transit An amount received and recorded by the business but which has not been recorded by the bank in time to appear on the current bank statement Several types of transactions are recorded by the bank but not yet recorded by the business Service Charges Are fees charged by the bank for checking account services The amount of the fee is not known to the business and therefore cannot be recorded until the bank statement is received 0 Nonsufficient Funds NSF Check that has been returned to the depositor because funds in the issuer s account are not sufficient to pay the check bounced check Example Balance Per Bank Statement 93015 Outstanding Checks Deposits in Transit i Bank Errors Adjusted Balance Per Bank Statement Balance Per Financial Records 93015 Service Charge NSF Checks NSF Check Charges i Bank Errors Adjusted Balance Per Financial Records 0 Debit Memo Decline in Account Balance Credit Memo Increase in Account Balance Must Be SS The Same ACC 131 Seipp 921925 Cash Management The process that a company engages in in order to maximize return on their cash The activities of the operating cycle transform cash into goods and services and then back through sales into cash Cash management principles Delaying paying suppliers so a company can earn as much interest on their cash as possible Speeding up collection from customers in order to invest the cash soone Earning the greatest return on any excess cash


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