Acct Test 3 Ch 8
|Cash||includes currency, coins and amounts on deposit in bank accounts, checking accounts, and savings accounts.|
|Cash equivalents||include short-term, highly liquid investments that are easily converted into a known cash amount and that are close to maturity and are not sensitive to interest rate changes.|
|Liquidity||refers to how easily an asset can be converted into cash to be used to pay for services and obligations. Cash and similar assets are called _____ assets because they can be readily used to settle obligations.|
| 1) Establish responsibilities|
2) Maintain adequate records
3) Insure assets and bond key employees.
4) Separate recordkeeping from custody of assets.
5) Divide responsibility for related transactions
6) Apply technological controls.
7) Perform regular and independent reviews.
|PRINCIPLES OF INTERNAL CONTROL|
|Cash Over and Short||will appear in the income statement and is closed at the end of the period. It will be classified as either miscellaneous revenue or miscellaneous expense, depending on the account balance.|
|voucher system||establishes procedures that help to verify, approve and properly record cash disbursements. A key factor in this system is that only approved departments and individuals are authorized to incur obligations in the company's name.|
|Petty cash||Small payments required in most companies for items such as postage, courier fees, repairs and supplies.|
|Days' Sales Uncollected ratio||indicates how much time is likely to pass before we receive cash receipts from credit sales. It is calculated as Accounts Receivable divided by Net Sales times 365 days.|
|voucher||An internal file used to store documents and information to control cash disbursements and to ensure that a transaction is properly authorized and recorded.|
|Invoice||An itemized statement of goods prepared by the vendor listing the customer's name, items sold, sales prices, and terms of sale.|
|Purchase Requisition||A document used by department managers to inform the purchasing department to place an order with a vendor.|
|Receiving Report||A document used to notify the appropriate persons that ordered goods have arrived, including a description of the quantities and condition of goods.|
|Invoice Approval||A checklist of steps necessary for the approval of an invoice for recording and payment; also known as a check authorization.|
|Purchase Order||A document used to place an order with a vendor that authorizes the vendor to ship ordered merchandise at the stated price and terms.|
|Bank Statement balance ADD||deposits in transit / unrecorded deposits|
|Bank Statement balance DEDUCT||outstanding checks|
|Bank Statement balance ADD OR DEDUCT||bank errors|
|Book Balance ADD||Collections made by the Bank|
|Book Balance ADD||Interest Earned on Checking Account|
|Book Balance DEDUCT||Non Sufficient Funds Check NSF|
|Book Balance ADD OR DEDUCT||Book errors|
|Book Balance DEDUCT||Bank Service Charge|
|Book Balance ADD||credit memos|
|Accounts Receivable / Net Sales x 365 days||Days' Sales Uncollected ratio|
|Book Balance DEDUCT||debit memos|