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– deposit in transit – outstanding checks
Accounting, 5/E GUOWEI HUST 7 - 14
华中科技大学管理学院
The Bank Reconciliation
Items on a bank statement and not recorded by the business:
Interna华l中科C技大o学管n理t学r院ols for e-Commerce
Stolen credit card numbers Computer virus and Trojan horses
Impersonation of companies
Accounting, 5/E GUOWEI HUST 7 - 8
Equal amounts Accounting, 5/E GUOWEI HUST 7 - 24
华中科技大学管理学院
Service charge
12
Adjusted book balance
$ 66,525
Accounting, 5/E GUOWEI HUST 7 - 23
The Ban华k中科R技大e学c管理o学n院 ciliation Example
Balance per books $66,525
Balance per bank $66,525
华中科技大学管理学院
Internal Control, Managing Cash, and Making Ethical Judgments Chapter 7
Accounting, 5/E GUOWEI HUST 7 - 1
华中科技大学管理学院
Objective 1 Define internal control.
Accounting, 5/E GUOWEI HUST 7 - 2
华中科技大学管理学院
Internal Control
What is internal control? It is the organizational plan and all the
related measures that an entity adopts to… – safeguard assets, – encourage adherence to company policies, – promote operational efficiency, and... – ensure accurate and reliable accounting
The Internet Firewall Corporate Intranet
Network Computers
Accounting, 5/E GUOWEI HUST 7 - 10
The L华i中m科技大it学a管理t学io院 ns of Internal Control
Most internal control measures can be circumvented or overcome.
华中科技大学管理学院
The Bank Reconciliation
What are two records of a business’s cash? 1 Cash account in the business’s own general
ledger. 2 The bank statement which tells the actual
Accounting, 5/E GUOWEI HUST 7 - 20
The Ban华k中科R技大e学c管理o学n院 ciliation Example
Sahita’s books indicates a cash balance of $66,647.
A deposit of $11,250 was mailed to the bank on June 30.
Accounting, 5/E GUOWEI HUST 7 - 6
华中科技大学管理学院
Separation of Duties
Separation of operations from accounting Separation of the custody of assets from accounting
Documents used to control a bank account include:
– signature card – deposit ticket – check – bank statement – bank reconciliation
Accounting, 5/E GUOWEI HUST 7 - 12
records. Accounting, 5/E GUOWEI HUST 7 - 3
华中科技大学管理学院
Internal Control
Operational Controls Financial Reporting Controls
Accounting, 5/E GUOWEI HUST 7 - 4
Interna华l中科C技大o学管n理t学r院ols for e-Commerce
What is an encryption? It is the primary method of achieving
confidentiality in e-commerce. Plain-text messages are rearranged by some
mathematical process. The encrypted message cannot be read by
anyone who does not know the process.
Accounting, 5/E GUOWEI HUST 7 - 9
Interna华l中科C技大o学管n理t学r院ols for e-Commerce
Maker writes check
to payee.
Maker’s bank pays the check.
Payee’s bank sends check to maker’s bank.
Payee deposits check
in bank.
Accounting, 5/E GUOWEI HUST 7 - 16
Checks issued in June for $8,000 have not yet been paid by the bank.
Accounting, 5/E GUOWEI HUST 7 - 21
The Ban华k中科R技大e学c管理o学n院 ciliation Example
Balance per bank, June 30 Add deposit in transit
Separation of the authorization of transactions from the custody of related assets
Separation of duties within the accounting function Accounting, 5/E GUOWEI HUST 7 - 7
Collusion is when two or more employees work as a team with the purpose to defraud the firm.
Accounting, 5/E GUOWEI HUST 7 - 11
The Ban华中k科技A大学c管理c学o院unt as a Control Device
It indicated the following: The bank balance was $63,275. The bank had collected a note receivable
from one of Sahita’s customers in the amount of $1,325.
Accounting, 5/E GUOWEI HUST 7 - 19
The Ban华k中科R技大e学c管理o学n院 ciliation Example
The bank paid the electric bill of $1,500. There was a $200 check returned for NSF. Interest earned on the account was $265. Bank service charges were $12.
Accounting, 5/E GUOWEI HUST 7 - 18
The Ban华k中科R技大e学c管理o学n院 ciliation Example
At the beginning of July, Sahita, Inc. received the June’s bank statement.
Less outstanding check Adjusted bank balance
$63,275
11,250 $74,525
8,000 $66,525
Accounting, 5/E GUOWEI HUST 7 - 22
The Ban华k中科R技大e学c管理o学n院 ciliation Example
The Paths Th华a中t科技T大学w管理o学院Checks Take (NFS Check)
Maker’s bank sends the worthless
check back to payee’s bank.
Maker’s bank balance is not sufficient to pay the check.
Payee’s bank decreases payee’s
balance.
Payee holds worthless
