acct 201 acct 201 acct 201 reporting and analyzing cash and internal controls uaa – acct 201...
Post on 18-Dec-2015
228 Views
Preview:
TRANSCRIPT
AC
CT 2
01 A
CC
T 2
01
AC
CT 2
01
Reporting and Analyzing Cash and Internal Controls
UAA – ACCT 201 Principles of Financial
Accounting Dr. Fred Barbee
Chap
ter 6
AC
CT 2
01 A
CC
T 2
01
AC
CT 2
01
Day #1
Topic LO Read HW
Internal ControlC1, C2
250-254
QS1, QS3,
E1, E3, P1A
Control of CostsC3, P1, 2, 3, 4
254-262
E2, E4, E10
Chapter 6 - Day 1 - Agenda
No Homework Due Today!
AC
CT 2
01 A
CC
T 2
01
AC
CT 2
01
Reporting and Analyzing Cash and Internal Controls
Internal Control
Chap
ter 6
AC
CT 2
01 A
CC
T 2
01
AC
CT 2
01
Internal Control – All Policies and Procedures Used to . . .
Protect assets.
Ensure reliable accounting.
Promote efficient operations.
Urge adherence to company policies.
AC
CT 2
01 A
CC
T 2
01
AC
CT 2
01
Principles of Internal Control
Establish responsibilities.
Maintain adequate records.
Insure assets and bond employees.
AC
CT 2
01 A
CC
T 2
01
AC
CT 2
01
Principles of Internal Control
Separate recordkeeping and custody over assets
Divide responsibility for related transactions.
AC
CT 2
01 A
CC
T 2
01
AC
CT 2
01
Principles of Internal Control
Apply technological controls.
Perform regular and independent reviews.
AC
CT 2
01 A
CC
T 2
01
AC
CT 2
01
Technology and Internal Control
ReducedProcessing
Errors
MoreExtensive Testing
of Records
LimitedEvidence ofProcessing
CrucialSeparation of
Duties
AC
CT 2
01 A
CC
T 2
01
AC
CT 2
01
Limitations of Internal Control
Human Error
NegligenceFatigue
MisjudgmentConfusion
Human Fraud
Intent todefeat internal
controls forpersonal gain
AC
CT 2
01 A
CC
T 2
01
AC
CT 2
01
Limitations of Internal Control
The costs of internal controls must not exceed their
benefits.
The costs of internal controls must not exceed their
benefits.
CostsCostsBenefitsBenefits
AC
CT 2
01 A
CC
T 2
01
AC
CT 2
01
Reporting and Analyzing Cash and Internal Controls
Control of Cash
Chap
ter 6
AC
CT 2
01 A
CC
T 2
01
AC
CT 2
01
Cash, Cash Equivalents, and Liquidity
CashCurrency, coins and amounts on deposit in bank account, checking accounts, and some savings accounts.
AC
CT 2
01 A
CC
T 2
01
AC
CT 2
01
Cash Equivalents are short-term, highly liquid investments that are:
Readily convertible to a known cash amount.
Close to maturity date and not sensitive to interest rate changes.
Cash, Cash Equivalents, and Liquidity
AC
CT 2
01 A
CC
T 2
01
AC
CT 2
01
Cash, Cash Equivalents, and Liquidity
Liquidity
How easily an asset can be converted into another asset or be used in paying for services or obligations.
Inventory Cash
AC
CT 2
01 A
CC
T 2
01
AC
CT 2
01
Control of Cash
Segregate handling of cash from recordkeeping of cash.
Cash receipts are promptly (daily) deposited in a bank.
Cash disbursements are made by check.
AC
CT 2
01 A
CC
T 2
01
AC
CT 2
01
Control of Cash Receipts
Over-the-Counter Cash Receipts
Cash register with locked-in record of transactions.
Compare cash register record with cash reported.
AC
CT 2
01 A
CC
T 2
01
AC
CT 2
01
Control of Cash Receipts
Cash Receipts By Mail
Two people open the mail.
Money to cashier’s office
List to accounting dept.
Copy of list filed
AC
CT 2
01 A
CC
T 2
01
AC
CT 2
01
Control of Cash Disbursements
All expenditures made by check. The only exception is for small payments from petty cash.
Separate authorization, check signing and recordkeeping duties.
Apply a voucher system.
AC
CT 2
01 A
CC
T 2
01
AC
CT 2
01
A Voucher System of Control
Establishes procedures for:
Accepting obligations resulting in cash disbursements.
Verifying, approving and recording obligations.
Issuing checks for payment of verified, approved and recorded obligations.
AC
CT 2
01 A
CC
T 2
01
AC
CT 2
01
A Voucher System of Control
Establishes procedures for:
Requiring obligations be recorded when incurred.
Treating each purchase as an independent transaction.
Check
Invoice Approval
Receiving Report
Invoice
Purchase Order
Voucher System of Control
Purchase Requisition
Voucher
Cashier’s Office
Accounting Dept.
Receiving Dept.
Supplier (Vendor)
Purchasing Dept.
Requesting Dept.
Cashier’s OfficeAccounting, Requesting,
Purchasing Depts.
Accounting Dept.
Supplier (Vendor)
Purchasing andAccounting Depts.
Supplier (Vendor)
Purchasing
RequestingDepartment
Accounting
One copyof purchaserequisition
used toprepare the
voucher.
One copyof purchaserequisition
used toprepare the
voucher.
Clothes Mart No. 1167
From: Shoe DepartmentTo: Purchasing
Request purchase of the following item(s):Model No. Description Quantity
ABA32 Sandals - black 25
C1287 Sandals - white 25
Reason for Request: Refill stock
Approved by: Andy Taylor
Purchase Requisition
Clothes Mart No. 1167
From: Shoe DepartmentTo: Purchasing
Request purchase of the following item(s):Model No. Description Quantity
ABA32 Sandals - black 25
C1287 Sandals - white 25
Reason for Request: Refill stock
Approved by: Andy Taylor
Purchase Requisition
Clothes Mart No. 1167
From: Shoe DepartmentTo: Purchasing
Request purchase of the following item(s):Model No. Description Quantity
ABA32 Sandals - black 25
C1287 Sandals - white 25
Reason for Request: Refill stock
Approved by: Andy Taylor
Purchase Requisition
Copy 2
Copy 1
Retained in Purchasing
Clothes Mart No. M47
Nashville, TN
To: Westcoast Shoes35 Sunset PlaceSan Clemente, CA 90277
Model No. Description Quantity Price Amount
ABA32 Sandals - black 25 8.00$ 200.00$
C1287 Sandals - white 25 8.00 200.00
All shipments and invoices must include PO number
Order by: B.T. Fife
Purchase Order
Clothes Mart No. M47
Nashville, TN
To: Westcoast Shoes35 Sunset PlaceSan Clemente, CA 90277
Model No. Description Quantity Price Amount
ABA32 Sandals - black 25 8.00$ 200.00$
C1287 Sandals - white 25 8.00 200.00
All shipments and invoices must include PO number
Order by: B.T. Fife
Purchase Order
Clothes Mart No. M47
Nashville, TN
To: Westcoast Shoes35 Sunset PlaceSan Clemente, CA 90277
Model No. Description Quantity Price Amount
ABA32 Sandals - black 25 8.00$ 200.00$
C1287 Sandals - white 25 8.00 200.00
All shipments and invoices must include PO number
Order by: B.T. Fife
Purchase Order
Clothes Mart No. M47
Nashville, TN
To: Westcoast Shoes35 Sunset PlaceSan Clemente, CA 90277
Model No. Description Quantity Price Amount
ABA32 Sandals - black 25 8.00$ 200.00$
C1287 Sandals - white 25 8.00 200.00
All shipments and invoices must include PO number
Order by: B.T. Fife
Purchase Order
Copy 3
Copy 2Accounting
Requesting Dept.
Copy 1Vendor
Clothes Mart Voucher No. 2718
Nashville, Tennessee
Date: May 22, 2002Pay to: Westcoast Shoes
City: San Clemente State: CA
For the following:(attach all invoices and supporting documents)
Invoice Date Terms Invoice No. and Details Amount05/18/02 2/10, n/30 Invoice 2718 400.00$ 05/28/02 2/10, n/30 Less discount 8.00
Net amount payable 392.00$
Payment approval:
Bart ThurmanAuditor
Inside of a VoucherInside of a Voucher
Account Debited AmountMerchandise inventory 392.00 Due dateStore supplies Pay to: Westcoast ShoesOffice supplies City: San ClementeSelling expense State: CAGeneral expeneOther: Summary of charges:
Total charges 400.00$ Discount 8.00 Net payment 392.00$
Record of payment:
Voucher Payable Credit 392.00 Paid Check No.
Accounting Distribution
Outside of a Voucher
AC
CT 2
01 A
CC
T 2
01
AC
CT 2
01
Petty Cash System of Control
Small payments required in most companies for items such as postage, courier fees, repairs and supplies.
AC
CT 2
01 A
CC
T 2
01
AC
CT 2
01
Operating a Petty Cash Fund
Petty Cashier
Treasurer andTreasurer andAccountantAccountant
Petty CashierPetty Cashier
GENERAL JOURNAL Page 4Date Description PR Debit Credit
May 1 Petty Cash 400
Cash 400
AC
CT 2
01 A
CC
T 2
01
AC
CT 2
01
Petty Cashier
Petty CashierPetty Cashier
Operating a Petty Cash Fund
AC
CT 2
01 A
CC
T 2
01
AC
CT 2
01
Petty CashierPetty Cashier
34¢
Stamps Courier
Operating a Petty Cash Fund
Petty CashierPetty Cashier
34¢
Stamps Courier
Receipts
Petty CashierPetty Cashier
Receipts
Treasurer andTreasurer andAccountantAccountant
GENERAL JOURNAL Page 4Date Description PR Debit Credit
May 15 Postage Expense 45
Courier Expense 80
Cash 125
$125To reimburse
petty cash fund
We use a CashOver and Short
account if needed.
We use a CashOver and Short
account if needed.
Operating a Petty Cash Fund
Petty Cash Example
Tension Co. maintains a petty cash fund of Tension Co. maintains a petty cash fund of $400. The following summary information $400. The following summary information was taken from petty cash vouchers for was taken from petty cash vouchers for July:July:
Travel Expenses $79.30Customer Business Lunches 93.42Express Mail Postage 55.00Miscellaneous Office Supplies 32.48
Let’s look at replenishing the fund if the Let’s look at replenishing the fund if the balance on July 31 was $137.80. balance on July 31 was $137.80.
AC
CT 2
01 A
CC
T 2
01
AC
CT 2
01
Petty Cash Example
What amount of cash will be required to replenish the petty cash fund?a. $260.20b. $262.20c. $139.80d. $137.80
AC
CT 2
01 A
CC
T 2
01
AC
CT 2
01
Petty Cash Example
The journal entry to replenish the petty cash fund is:
GENERAL JOURNAL Page 8Date Description PR Debit Credit
Jul 31 Travel Expense 79.30
Entertainment Expense 93.42
Postage Expense 55.00
Office Supplies Expense 32.48
Cash Over and Short 2.00
Cash 262.20
AC
CT 2
01 A
CC
T 2
01
AC
CT 2
01
Reporting and Analyzing Cash and Internal Controls
Control of Purchases Discounts
Chap
ter 6
Control of Purchase Discounts
Previously we have recorded purchases of Merchandise Inventory at the
gross amount. Discounts were not recognized until payment was made.
As an alternative, we may record the purchase net of any discount. We
assume that all discounts will be taken.
Control of Purchase Discounts
When we use the net method, attention is drawn when available
discounts are not taken.
Discounts Lost is anexpense account and is included
on the income statement.
Control of Purchase Discounts
top related