chapter six notes Flashcards
cash
the most easily manipulated asset->it disappears easily
cash equivalents must be
- readily convertible
- have an original maturity of 3 months or less
marketable securities
short term investments that are not due within 3 months
examples of cash equivalents
treasury bill, commercial paper, money market fund, cd
tools of effective cash management include:
- cash controls over receipts and disbursements
- preparation of bank reconciliations
- use of petty cash fund
control of cash receipts
- record when received
- deposit receipts intact
- separation of duties
separation of duties
different employees for each of the following: recording, custody, and authorization
control of cash disbursements
- all major disbursements made by check
- pay only small, miscellaneous expenditures from petty cash
- prepare bank reconciliation
record everything for bank reconciliation on ___ ____
book side
credit memo
bank increases your cash account
debit memo
bank reduces your cash account
cash in the bank eye’s is technically a _____
liability, they owe you that money back
deposits in transit
checks not processed by the bank yet (usually the next day)
outstanding checks
checks not deposited by clients
notes collected
payments sent directly to the bank
NSF checks
“bad check”, clients didn’t have the money
overdraft charge
fee for the bank’s trouble from bad check
service charge
fee for services from the bank
internal control is necessary to ensure:
- the safeguarding of a company’s assets
- the reliability of its accounting records
- the accomplishment of its overall objectives
control environment
management’s competence and operating style, personal policies, and influence by the board of directors
accounting system
methods and records used to report financial information
proper authorization
authority and responsibility for approval of purchases/writing checks
segregation of duties
separate physical custody from the accounting for assets
independent verification
one individual or department acts as a check on the work of another
safegaurding assets and records
protect assets and accounting records from loss, theft, unauthorized use
independent review and appraisal
periodic review of the accounting system and the people operating it (external audit)
the design and use of business documents
capture all relevant information about a transaction and assist in proper recording and classification
