ch01 Internal Control and Cash.pptVIP

Internal Control and Cash Chapter 1 Objective 1 Internal Control What is internal control? It is the organizational plan and all the related measures that an entity adopts to… safeguard assets, encourage adherence to company policies, promote operational efficiency, and... ensure accurate and reliable accounting records. Internal Control Objective 2 Establishing an Effective System of Internal Control Characteristics of an effective internal control system include: Competent, reliable, and ethical personnel Assignment of responsibilities （Proper authorization） 3 Separation of duties Separation of Duties The Limitations ofInternal Control Most internal control measures can be overcome. Collusion is when two or more employees work as a team with the purpose to defraud the firm. The Bank Account as aControl Device Documents used to control a bank account include: signature card deposit ticket check bank statement bank reconciliation The Bank Reconciliation What are two records of a business’s cash? Cash account in the business’s own general ledger. The bank statement which tells the actual amount of cash the business has in the bank. The Bank Reconciliation Items recorded by a company not on the bank statement: deposit in transit（ outstanding deposits） outstanding checks Bank Errors The Bank Reconciliation Items on a bank statement and not recorded by the business: bank collections ETF（Electronic Funds Transfers） bank fees(Service charges ) interest earned on account NSF checks（Nonsufficient funds checks ） Check printing charge Book Errors The Paths That Two Checks Take (Good Check) The Paths That Two Checks Take (NFS Check) Objective 3 The Bank Reconciliation Example At the beginning of July, Sahita, Inc. received the June’s bank statement. It indicated the following: The bank balance was $63,275. The bank had collected a note receivable from one of Sahita’s customers in the amount of $1,325. The Bank Reconciliation Example The bank paid the electric bi