ACCT 001A Lecture Notes - Lecture 8: Cash Management, Cash Cash, Cash Register

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pucemallard867

25 Jun 2020

School

Pasadena City College

Department

Accounting

Course

ACCT 001A

Professor

Hossain

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Document Summary

Internal control is a system put in place to product a company"s assets and to make sure information is accurate. The sarbanes oxley act says that managers now must actually sign off that their internal controls are effective and what those internal controls are . Also, puts restrictions on what outside cpa firms. Establish responsibilities, maintain adequate records, insure assets and bond key employees, separate record keeping from custody of assets, divide responsibility for related transactions, apply technological controls, perform regular and independent reviews. Reduces processing errors, allows more extensive testing of records, limits evidence of processing processing, increases e-commerce, makes crucial separations of duties difficult, Human fraud- intent to defeat internal controls for personal gain. The costs of internal controls must not exceed their benefits. An effective system of internal controls protects cash and cash equivalents should meet their basic guidelines: Handling cash is separate from recordkeeping of cash. Cash receipts are promptly deposited in a bank.

Related Questions

True or False:

An advantage of FIFO is that it assigns the most recent costs to cost of goods sold, and does a better job of matching current costs with revenues on the income statement.

A properly designed internal control system is a key part of systems design, analysis, and performance.

An internal control system consists of the policies and procedures companies use to protect assets, ensure reliable accounting, promote efficient operations, and uphold company policies.

Technologically advanced accounting systems rarely need monitoring for errors because computers always process transactions correctly.

Separation of duties involves dividing responsibility for a transaction or a series of related transactions between two or more individuals or departments.

The Sarbanes-Oxley Act (SOX) requires managers and auditors of companies whose stock is traded on an exchange to document and certify the system of internal controls.

A receivable is an amount due from another party.

Credit sales are recorded by crediting Accounts Receivable.

The accounts receivable turnover indicates how often accounts receivable are received and collected during the period.

A high accounts receivable turnover in comparison with competitors suggests that the firm should tighten its credit policy.

The direct write-off method of accounting for bad debts records the loss from an uncollectible account receivable when it is determined to be uncollectible.

periwinklebeetle160

Solve the following QS and Exercises from your textbook in chapter 8.

QS 8-1

Internal control objectives

An internal control system consists of all policies and procedures used to protect assets, ensure reliable accounting, promote efficient operations, and urge adherence to company policies. Evaluate each of the following statements and indicate which are true and which are false regarding the objectives of an internal control system.

____	1.	Separation of recordkeeping for assets from the custody over assets is intended to reduce theft and fraud.
____	2.	The primary objective of internal control procedures is to safeguard the business against theft from government agencies.
____	3.	The main objective of internal control procedures is best accomplished by designing an operational system with managerial policies that protect the assets from waste, fraud, and theft.
____	4.	Separating the responsibility for a transaction between two or more individuals or departments will not help prevent someone from creating a fictitious invoice and paying the money to herself or himself.

QS 8-2

Cash and equivalents

Choose from the following list of terms/phrases to best complete the following statements.

a.	Cash
b.	Cash equivalents
c.	Outstanding check
d.	Liquidity
e.	Bank reconciliation
f.	Current assets

____	1.	The category includes currency and coins along with amounts on deposit in bank accounts, checking accounts, and savings accounts.
____	2.	The term __________ refers to a companyâs ability to pay for its near-term obligations
____	3.	The __________ category includes short-term highly liquid investment assets that are readily convertible to a known cash amount and sufficiently close to their due dates so that their market value is not sensitive to interest rate changes.

QS 8-3

Internal control for cash

A good system of internal control for cash provides adequate procedures for protecting both cash receipts and cash disbursements. Identify each of the following statements as either true or false regarding this protection.

____	a.	A basic guideline for safeguarding cash is that all cash receipts be deposited weekly or monthly.
____	b.	A voucher system of control is a control system exclusively for cash receipts.
____	c.	A basic guideline for safeguarding cash is to separate the duties of those who have custody of cash from those who keep cash records.
____	d.	A petty cash system is not a control procedure for safeguarding cash.

QS 8-4

Petty cash accounting

The petty cash fund of the Brooks Agency is established at $150. At the end of the current period, the fund contained $28 and had the following receipts: film rentals, $24; refreshments for meetings, $46 (both expenditures to be classified as Entertainment Expense); postage, $30; and printing, $22. Prepare journal entries to record (a) establishment of the fund and (b) reimbursement of the fund at the end of the current period.

Identify the two events from the following that cause a Petty Cash account to be credited in a journal entry.

____	a.	Fund amount is being reduced
____	b.	Fund amount is being increased
____	c.	Fund is being eliminated
____	d.	Fund is being established

Exercise 8-13^A

Documents in a voucher system

Match each document in a voucher system in column one with its description in column two.

Document

1.	Purchase requisition
2.	Purchase order
3.	Invoice
4.	Receiving report
5.	Invoice approval
6.	Voucher

Description

____	A.	An itemized statement of goods prepared by the vendor listing the customerâs name, items sold, sales prices, and terms of sale.
____	B.	An internal file used to store documents and information to control cash disbursements and to ensure that a transaction is properly authorized and recorded.
____	B.	An internal file used to store documents and information to control cash disbursements and to ensure that a transaction is properly authorized and recorded.
____	C.	A document used to place an order with a vendor that authorizes the vendor to ship ordered merchandise at the stated price and terms.
____	D.	A checklist of steps necessary for the approval of an invoice for recording and payment; also known as a check authorization.
____	E.	A document used by department managers to inform the purchasing department to place an order with a vendor.
____	F.	A document used to notify the appropriate persons that ordered goods have arrived, including a description of the quantities and condition of goods.

Exercise 8-14^B

Record invoices at gross or net amounts

Piere Imports uses the perpetual system in accounting for merchandise inventory and had the following transactions during the month of October. Prepare entries to record these transactions assuming that Piere Imports records invoices (a) at gross amounts and (b) at net amounts.

Oct.	2	Purchased merchandise at a $3,000 price, invoice dated October 2, terms 2/10, n/30.
	10	Received a $500 credit memorandum (at full invoice price) for the return of merchandise that it purchased on October 2.
	17	Purchased merchandise at a $5,400 price, invoice dated October 17, terms 2/10, n/30.
	27	Paid for the merchandise purchased on October 17, less the discount.
		31Paid for the merchandise purchased on October 2. Payment was delayed because the invoice was mistakenly filed for payment today. This error caused the discount to be lost. Please provide all the answer thank you

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ACCT 001A Lecture Notes - Lecture 8: Cash Management, Cash Cash, Cash Register

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