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ACCT110 Ch 8
Cash and Internal Controls
| Term | Definition |
|---|---|
| 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. |
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