The American History of Good Things and Nice Stuff

CHAPTER 5 ACCOUNTING NOTES

A check has been cleared when funds have been withdrawn from your bank account.

Cash receipts responsibilities go down the line by: cashier, supervisor, then accounting team.

SOX act provides increased regulations for: internal controls, auditors, and corporate executives

        Aims to reduce fraud by counteract incentives, reducing opportunities, and encouraging honesty

        Reduces opportunity by internal control, and stronger oversight by directors

Interest is added to the book balance.

Deposits in transit are added to the bank side of the bank reconciliation

NSF checks from customers should be deducted from the book balance of the bank reconciliation

Reconciling items the bank would not know about due to time lags are deposits in transit and outstanding checks

Outstanding checks written by the company should be a deduction from the company’s bank reconciliation

Segregation of duties is essential for safe guarding assets, makes it to where one person doesn’t control two accounts and can easily steal

Voucher system- approving and documenting all purchases and payments made on accounts

Fraud triangle- incentive, opportunity, rationalization

A withdrawal from the bank is a debit because a withdrawal decreases its liability from a banks POV

Banks provide important controls for a company’s cash, these are: provide documentation, restrict access, independent verification

Good internal control for cash receipts by a supervisor include: completing bank deposits, locking up, comparing cash

        And for the accounting department: recording cash receipts in journal and comparing cash