College Accounting Honors: October 2019

Thursday, October 31, 2019

Day 50: Basics of Cash

Chapter 7 Problems

Textbook Pages

pg 359 Multiple Choice Question 1
pg 360 Exercise 1
pg 364 Discussion Questions 1, 2, 3, 4, 5
pg 364 Basic Exercise 7-1
pg 365 Exercises 7-2 & 7-3

Preview Next Topics

Types of "Cash"

Currency (bills)
Coins
Money Orders

Change Fund

money put in cash registers to make change for customers

Sources of Cash Receipts:

Cash Sales at cash register
Checks received on account through the mail

with Remittance Advice

EFT Receipts

faster
easier
safer
more accurate
better control

Cash Sales Journal Entry
Cash (asset)                                108
Cash Short and Over (expense)      2
         Sales (revenue)                             100
         Sales Tax Payable (liability)            10

Wednesday, October 30, 2019

Day 49: Control Procedures

Control Procedures
provide reasonable assurance that business goals will be achieved, including the prevention of fraud.

Competent personnel, rotating duties, and mandatory vacations

properly training and supervising personnel
rotating duties and mandating vacations helps identify irregularities

Separating duties for related operations

cashier, cook, waiter
ticket Sales, ticket-taker

Separating operations, custody of assets, and accounting

By separating the responsibilities for operations, custody of assets, and accounting, the accounting records serve as an independent check on the operating managers and the employees who have custody of assets.

Proofs

authorization, approval, and reconciliation.

Security measures

locked cases, security guards, mirrors, security tags, cash registers, safes.

Tuesday, October 29, 2019

Day 48: Control Framework

The Control Environment Overall attitude of management and employees about the importance of controls.
Three factors influencing a company’s control environment include the following:

Management’s philosophy and operating style

Management’s philosophy and operating style relates to whether management emphasizes the importance of internal controls.

The company’s organizational structure

The business’s organizational structure is the framework for planning and controlling operations.

The company’s personnel policies

The business’s personnel policies involve the hiring, training, evaluation, compensation, and promotion of employees.

In addition, job descriptions, employee codes of ethics, and conflict-of-interest policies are part of the personnel policies.

Risk Assessment
All businesses face risks such as changes in customer requirements, competitive threats, regulatory changes, and changes in economic factors.

Management should:

identify such risks,
analyze their significance, assess their likelihood of occurring,
and take any necessary actions to minimize them.

Monday, October 28, 2019

Day 47: Internal Controls Discussion

Sarbanes-Oxley Act of 2002

often referred to as Sarbanes-Oxley or SOX
applies only to companies whose stock is traded on public exchanges.
purpose is to restore public confidence and trust in financial reporting of companies
emphasizes importance of effective internal control.
requires companies to maintain effective internal controls over the recording of transactions and the preparing of financial statements

Internal control

procedures and processes used by a company to:

Safeguard its assets.
Process information accurately.
Ensure compliance with laws and regulations.

Objectives of Internal Control are to provide reasonable assurance that:

Assets are safeguarded and used for business purposes.
Business information is accurate.
Employees and managers comply with laws and regulations.

Employee Fraud

A serious concern of internal control is preventing employee fraud.
Employee fraud is intentional act of deceiving an employer for personal gain.

Elements of Internal Control
The three internal control objectives can be achieved by applying the five elements of internal control. These elements are as follows