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ACCT110 Ch 8

Cash and Internal Controls

TermDefinition
Bank reconciliation Report that explains the difference between the book (company) balance of cash and the cash balance reported on the bank statement.
Bank statement Bank report on the depositor’s beginning and ending cash balances, and a listing of its changes, for a period.
Canceled checks Checks that the bank has paid and deducted from the depositor’s account.
Cash Includes currency, coins, and amounts on deposit in bank checking or savings accounts.
Cash equivalents 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 Over and Short Income statement account used to record cash overages and cash shortages arising from errors in cash receipts or payments.
Check Document signed by a depositor instructing the bank to pay a specified amount to a designated recipient.
Check register Another name for a cash disbursements journal when the journal has a column for check numbers.
Committee of Sponsoring Organizations (COSO) Committee devoted to improving the quality of financial reporting through effective internal controls, consisting of five interrelated components, along with other mechanisms (www.COSO.org).
Days' sales uncollected 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.
Deposit ticket Lists items such as currency, coins, and checks deposited and their corresponding dollar amounts.
Deposits in transit Deposits recorded by the company but not yet recorded by its bank.
Discounts lost Expenses resulting from not taking advantage of cash discounts on purchases.
Electronic funds transfer (EFT) Use of electronic communication to transfer cash from one party to another.
Gross method Method of recording purchases at the full invoice price without deducting any cash discounts.
Internal control system All policies and procedures used to protect assets, ensure reliable accounting, promote efficient operations, and urge adherence to company policies.
Invoice Itemized record of goods prepared by the vendor that lists the customer’s name, items sold, sales prices, and terms of sale.
Invoice approval Document containing a checklist of steps necessary for approving the recording and payment of an invoice; also called check authorization.
Liquid assets Resources such as cash that are easily converted into other assets or used to pay for goods, services, or liabilities.
Liquidity Availability of resources to meet short-term cash requirements.
Net method Method of recording purchases at the full invoice price less any cash discounts.
Outstanding checks Checks written and recorded by the depositor but not yet paid by the bank at the bank statement date.
Petty cash Small amount of cash in a fund to pay minor expenses; accounted for using an imprest system.
Principles of internal control Principles prescribing management to establish responsibility, maintain records, insure assets, separate recordkeeping from custody of assets, divide responsibility for related transactions, apply technological controls, and perform reviews.
Purchase order Document used by the purchasing department to place an order with a seller (vendor).
Purchase requisition Document listing merchandise needed by a department and requesting it be purchased.
Receiving report Form used to report that ordered goods are received and to describe their quantity and condition.
Sarbanes-Oxley Act Regulates analyst conflicts, imposes corp governance reqmnts, enhances acct'ing & control disclosures, impacts insider transactions & executive loans, establishes new types of criminal conduct & expands penalties for violations of federal securities laws
Section 404 of SOX Requires managers document & assess effectiveness of all internal control processes that can impact financial reporting, and that auditors provide opinion on same.
Signature card Includes the signatures of each person authorized to sign checks on the bank account.
Vendee Buyer of goods or services.
Vendor Seller of goods or services.
Voucher Internal file used to store documents and information to control cash disbursements and to ensure that a transaction is properly authorized and recorded.
Voucher register Journal (referred to as book of original entry) in which all vouchers are recorded after they have been approved.
Voucher system Procedures and approvals designed to control cash disbursements and acceptance of obligations.
Created by: slk