Chapter 4 Vocab Flashcards
Bank reconciliation
Matching the balance of cash in the bank account with the balance of cash in the company’s records
Cash
Currency, coins, balances in savings and checking accounts, items acceptable for deposit in these accounts (such as checks received from customers), credit card and debit card sales, and cash equivalents
Cash equivalents
Short-term investments that have a maturity date no longer than three months from the date of purchase
Checks outstanding
Checks the company has written that have not been subtracted from the bank’s record of the company’s balance
Collusion
Two or more people acting in coordination to circumvent internal controls
Deposits outstanding
Cash receipts of the company that have not been added to the bank’s record of the company’s balance
Fraud triangle
The three elements present for every fraud is motivation, rationalization, and opportunity
Internal controls
A company’s plans to (1) safeguard the company’s assets and (2) improve the accuracy and reliability of accounting information
NSF check
A check received and deposited by a company that is later determined by the bank to have nonsufficient funds. Also known as a ‘bad’ check from a customer
Occupational Fraud
The use of one’s occupation for personal enrichment through the deliberate mise or misapplication of the employer’s resources
Petty cash fund
A small amount of cash kept on hand to pay for minor purchases
Purchase cards
Company-issued debit cards or credit cards that allow authorized employees to make purchases on behalf of the company
Sarbanes-Oxley Act
Known as the Public Company Accounting Reform and Investor Protection Act of 2002 and commonly referred to as SOX, the act established a variety of guidelines related to auditor-client relations and internal control procedures
Separation of duties
Authorizing transactions, recording transactions, and controlling related assets should be separated among employees
