Chapter 6 Flashcards
Report that explains the difference between the book (company) balance of cash and the cash balance reported on the bank statement.
BANK RECONCILIATION
Bank report on the depositor’s beginning and ending cash balances, and a listing of its changes, for a period.
BANK STATEMENT
Checks that the bank has paid and deducted from the depositor’s account.
CANCELED CHECKS
Includes currency, coins, and amounts on deposit in bank checking or savings accounts.
CASH
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.
CASH EQUIVALENTS
Income statement account used to record cash overages and cash shortages arising from errors in cash receipts or payments.
CASH OVER AND SHORT
Document signed by a depositor instructing the bank to pay a specified amount to a designated recipient.
CHECK
Another name for a cash disbursements journal when the journal has a column for check numbers.
CHECK REGISTER
A joint initiative of five private sector organizations dedicated to providing thought leadership through the development of frameworks and guidance on enterprise risk management, internal control, and fraud deterrence.
COMMITTEE OF SPONSORING ORGANIZATIONS (C0S0)
Measure of the liquidity of receivables computed by dividing the current balance of receivables by the annual credit (or net) sales and then multiplying by 365; also called DAYS’ SALES IN RECEIVABLES.
DAYS’ SALES UNCOLLECTED
(A/R / Net Sales) * 365
Lists items such as currency, coins, and checks deposited and their corresponding dollar amounts.
DEPOSIT TICKET
Deposits recorded by the company but not yet recorded by its bank.
DEPOSITS IN TRANSIT
Expenses resulting from not taking advantage of cash discounts on purchases.
DISCOUNTS LOST
Use of electronic communication to transfer cash from one party to another.
ELECTRONIC FUNDS TRANSFER (EFT)
Method of recording purchases at the full invoice price without deducting any cash discounts.
GROSS METHOD
All policies and procedures used to protect assets, ensure reliable accounting, promote efficient operations,and urge adherence to company policies.
INTERNAL CONTROL SYSTEM
Itemized record of goods prepared by the vendor that lists the customer’s name, items sold, sales prices, and terms of sale.
INVOICE
Document containing a checklist of steps necessary for approving the recording and payment of an invoice; also called CHECK AUTHORIZATION.
INVOICE APPROVAL
Resources such as cash that are easily converted into other assets, or used to pay for goods, services, or liabilities.
LIQUID ASSETS
Availability of resources to meet short-term cash requirements.
LIQUIDITY
Method of recording purchases at the full invoice price less any cash discounts.
NET METHOD
Checks written and recorded by the depositor but not yet paid by the bank at the bank statement date.
OUTSTANDING CHECKS
Small amount of cash in a fund to pay minor expenses; accounted for using an imprest system.
PETTY CASH
Principles prescribing management to establish responsibility, maintain records, insure assets, separate record-keeping from custody of assets, divide responsibility for related transactions, apply technological controls & perform reviews.
PRINCIPLES OF INTERNAL CONTROL
Document used by the purchasing department to place an order with a seller (vendor).
PURCHASE ORDER
Document listing merchandise needed by a department and requesting it be purchased.
PURCHASE REQUISITION
Form used to report that ordered goods are received and to describe their quantity and condition.
RECEIVING REPORT
Created the Public Company Accounting Oversight Board, regulates analyst conflicts, imposes corporate governance requirements, enhances accounting and control disclosures, impacts insider transactions and executive loans, establishes new types of criminal conduct, and expands penalties for violations of federal securities laws.
SARBANES-OXLEY ACT
Requires management and the external auditor to report on the adequacy of a company’s internal control on financial reporting, which is the most costly aspect of SOX for companies to implement as documenting and testing important financial manual and automated controls require enormous efforts. Section 404 also requires management to produce an ‘internal control report’ as part of each annual SEC report that affirms ‘the responsibility of management for establishing and maintaining an adequate internal control structure & procedures for financial reporting.’
SECTION 404 (of SOX)
Includes the signatures of each person authorized to sign checks on a bank account.
SIGNATURE CARD
Buyer of goods or services.
VENDEE
Seller of goods or services.
VENDOR
Internal file used to store documents and information to control cash disbursement and to ensure that a a transaction is properly authorized and recorded.
VOUCHER
Journal (referred to as Book of Original Entry) in which all vouchers are recorded after they have been approved.
VOUCHER REGISTER
Procedures and approvals designed to control cash disbursements and acceptance of obligations.
VOUCHER SYSTEM
purchase requisition
purchase order
invoice
receiving report
invoice approval (initiates recording of purch)
payment
How is the Bank side of the Bank Reconciliation calculated?
BALANCE per BANK (OUTSTANDING CHECKS) \+ DEPOSITS IN TRANSIT \+/- ERRORS MADE BY BANK = ADJUSTED BANK BALANCE
How is the Book side of the Bank Reconciliation calculated?
BALANCE per BOOKS \+ COLLECTIONS BY BANK (N/R) \+ INTEREST EARNED (Int. Rev.) (NSF CHECKS) (A/R) (BANK SVC CHGS) (Misc. Exp.) \+/- ERRORS IN BOOKS (Adj. to ? Acct.) = ADJUSTED BOOK BALANCE
