financial accounting,全英财务会计chapter4

1、Copyright 2012 Pearson Education Inc. Publishing as Prentice Hall. 1Copyright 2012 Pearson Education Inc. Publishing as Prentice Hall. 2 2Internal Control and CashChapter 4 (p. 214-)Copyright 2012 Pearson Education Inc. Publishing as Prentice Hall. 3Describe fraud and its impactSet up an internal co

2、ntrol systemCopyright 2012 Pearson Education Inc. Publishing as Prentice Hall. 4Fraud Intentional misrepresentation of factsLIE Causes injury or damage to another party Large problem that increases each yearCopyright 2012 Pearson Education Inc. Publishing as Prentice Hall. 5Types of FraudMisappropri

3、ation of assets Employees steal assets from company Cash Inventory False expense reportsFraudulent financial reporting Managers make false entries so company appears more profitable Deceives investors and creditorsCopyright 2012 Pearson Education Inc. Publishing as Prentice Hall. 6Fraud TriangleMoti

4、veRationalizationOpportunityCopyright 2012 Pearson Education Inc. Publishing as Prentice Hall. 7Explain the objectives and components of internal control (p. 215)Copyright 2012 Pearson Education Inc. Publishing as Prentice Hall. 8Internal Control (p. 215) Primary way fraud and errors are: Prevented

5、Detected or Corrected Management and Board of Directors implement a: Plan of organization System of procedures Environment of trustCopyright 2012 Pearson Education Inc. Publishing as Prentice Hall. 95 Objectives of Internal Control (p. 215)Safeguard assetsEncourage employees to follow policyPromote

6、operational efficiencyEnsure accurate, reliable recordsComply with legal requirementsCopyright 2012 Pearson Education Inc. Publishing as Prentice Hall. 10Sarbanes-Oxley Act (SOX) Federal law requiring public companies to have system of internal controls Auditors examine controls and issue reports on

7、 reliability Provisions: Require internal control report by companies Create Public Company Accounting Oversight Board Limit non-audit services of auditing firms Penalize violatorsLESSON: Laws will not protect you. You must protect yourself.Copyright 2012 Pearson Education Inc. Publishing as Prentic

8、e Hall. 11Shield of Internal Control (p. 216)Internal ControlsFraud WasteInefficiencyCompany assetsCopyright 2012 Pearson Education Inc. Publishing as Prentice Hall. 12Control ProceduresMonitoringInformation SystemControl EnvironmentRisk AssessmentComponents of Internal Control (p. 217)Copyright 201

9、2 Pearson Education Inc. Publishing as Prentice Hall. 13Control Environment Tone at the top Starts with owner(s) and top managers acting ethically Key ingredient Corporate code of ethics actual rules of conduct and behaviour“Ethical means knowing what is right.“Moral means doing what is right.”The e

10、thical man knows he should not cheat. The moral man does not cheat.Copyright 2012 Pearson Education Inc. Publishing as Prentice Hall. 14Risk Assessment Identify business risks Establish procedures to deal with risksCopyright 2012 Pearson Education Inc. Publishing as Prentice Hall. 15Information Syst

11、em and Control Procedures (p. 217- Information System How accounting information enters and exits company System must capture, process, and report transactions accurately Control procedures Built-in control environment and information system How companies meet five objectives of internal control (p.

12、 215)Copyright 2012 Pearson Education Inc. Publishing as Prentice Hall. 16Monitoring Controls Prohibit one employee or a group from processing a transaction completely Program controls into computerized system Hired auditors to monitor controls Internal monitor from the inside to safeguard assets Ex

13、ternal test from the outside to ensure accounting records are accurateCopyright 2012 Pearson Education Inc. Publishing as Prentice Hall. 17Internal Control Procedures (p. 217) Smart Hiring Practices (p. 217-18) Separation of Duties (p. 218) Asset handling Record keeping Transaction approval Comparis

14、on and Compliance Monitoring (pp 218-20) Operating and cash budgets Audits Manual or computer checksCopyright 2012 Pearson Education Inc. Publishing as Prentice Hall. 18Internal Control Procedures (p. 217) Adequate Records Hard copy or electronic Limited Access Assets by custodians Records by accoun

15、ting department Proper Approvals The larger the transaction, the more specific approvalCopyright 2012 Pearson Education Inc. Publishing as Prentice Hall. 19SCALP Smart hiring practices and segregation of duties Comparisons and compliance monitoring Adequate records Limited access Proper approvals“mn

16、emonic device”helps to rememberCopyright 2012 Pearson Education Inc. Publishing as Prentice Hall. 20Information Technology (IT) Accounting systems rely on more than ever before Examples: Electronic sensors Barcode scanning Basic attributes of internal control do not change Procedures to implement ar

17、e different Use of computers can greatly improve speed and accuracyCopyright 2012 Pearson Education Inc. Publishing as Prentice Hall. 21Safeguard Controls (p. 220 Other controls)Fireproof vaultsSecurity camerasFidelity bondsMandatory vacationsLoss prevention specialistsJob rotationCopyright 2012 Pea

18、rson Education Inc. Publishing as Prentice Hall. 22Internal Controls for E-Commerce (p. 220) Pitfalls of e-commerce Stolen credit card numbers Computer viruses and Trojan Horses Phishing expeditions Security measures Encryption FirewallsCopyright 2012 Pearson Education Inc. Publishing as Prentice Ha

19、ll. 23Costs and Benefits of Internal Control (p. 222) Ways good internal control can be circumvented Collusion Management override Fatigue & negligence The stricter the internal control, the more it costs The benefits should outweigh the costsCopyright 2012 Pearson Education Inc. Publishing as P

20、rentice Hall. 24Design and use a bank reconciliation (pp 222-)Copyright 2012 Pearson Education Inc. Publishing as Prentice Hall. 25Bank Account as Control Device (p. 222)Signature cardBank statementDeposit ticketBank reconciliationCheckCopyright 2012 Pearson Education Inc. Publishing as Prentice Hal

21、l. 26Bank Account Documents (p. 222) Signature card Protects against forgery Deposit ticket Proof of transaction Check Maker signs the check Payee to whom the check is paid Bank where funds are drawnCopyright 2012 Pearson Education Inc. Publishing as Prentice Hall. 27Bank Statement (p. 222-24) Repor

22、ts: Cash receipts Cash payments Electronic Funds Transfer (EFT) Make payments by electronic communicationCopyright 2012 Pearson Education Inc. Publishing as Prentice Hall. 28Bank Reconciliation (p.223) Two records of a businesss cash The Cash account in the general ledger The bank statement Amounts

23、are usually different Time lags in recording transactions Bank reconciliation explains differencesCopyright 2012 Pearson Education Inc. Publishing as Prentice Hall. 29Bank Side of the Reconciliation (p. 224) Deposits in transit Outstanding checks Bank errorsCopyright 2012 Pearson Education Inc. Publ

24、ishing as Prentice Hall. 30Book Side of the Reconciliation (p. 225) Bank collections Electronic funds transfers (EFT) Service charges Interest revenue Nonsufficient funds (NSF) checks Cost of printed checks Book errorsCopyright 2012 Pearson Education Inc. Publishing as Prentice Hall. 31Exercise 4-21

25、A (p. 226)Bank:Books:Balance, November 30$570 Balance, November 30$1,780Add: Add: Deposit in transit1,765 EFT rent collection335Less: Service charges(18)Less: NSF checks(120) Outstanding checks(601) Correction of error(243)$1,734$1,734Copyright 2012 Pearson Education Inc. Publishing as Prentice Hall

26、. 32Summary of Reconciling Items (p. 226)BANK BALANCE - ALWAYSBOOK BALANCE - ALWAYSAdd deposits in transitAdd bank collections, interest revenue, and EFT receiptsSubtract outstanding checksSubtract services charges, NSF checks, EFT paymentsAdd or subtract correction of bank errorsAdd or subtract cor

27、rection of book errorsCopyright 2012 Pearson Education Inc. Publishing as Prentice Hall. 33Journalizing Bank Reconciliation Items (p. 227) All items on the book side of the bank reconciliation require journal entries If the item is added to book side Debit Cash If the items is subtracted from the bo

28、ok side Credit CashCopyright 2012 Pearson Education Inc. Publishing as Prentice Hall. 34JOURNAL (p. 227)DateAccounts and explanationDebitCreditCash Interest Revenue To record interest earned on the bank statementCash Accounts ReceivableAccount receivable collected by bankMiscellaneous Expense CashBa

29、nk service chargesAccounts Receivable CashNSF check returned by bankCopyright 2012 Pearson Education Inc. Publishing as Prentice Hall. 35End of Chapter four for nowstop at page 229Copyright 2012 Pearson Education Inc. Publishing as Prentice Hall. 36Evaluate internal controls over cash receipts and c

30、ash paymentsCopyright 2012 Pearson Education Inc. Publishing as Prentice Hall. 37Internal Control over Cash (p. 332-) Cash is easy to steal All transactions ultimately affect cash Cash receipts should be deposited quickly Companies can receive cash Over the counter Through the mailCopyright 2012 Pea

31、rson Education Inc. Publishing as Prentice Hall. 38Cash Receipts over the Counter (p. 232) Point-of-sale terminals provide control over cash receipts Also record sale, cost of item sold, and reduction to inventory Customer issued a receipt as proof of purchase Sales associate turns in cash drawer at

32、 end of shift Combined with other cash and deposited Accounting department reconciles sales per terminal to cash in drawerCopyright 2012 Pearson Education Inc. Publishing as Prentice Hall. 39Cash Receipts by Mail (p. 232-33)MailroomChecksRemittance advicesAccounting DepartmentTreasurerDebit to CashD

33、eposit receiptBankControllerCopyright 2012 Pearson Education Inc. Publishing as Prentice Hall. 40Controls Over Payments by Check Payment by check or EFT payment is an important internal control Provides record of the payment Check must be signed by an authorized official EFT must be approved by an a

34、uthorized official Should be supported by evidence paymentCopyright 2012 Pearson Education Inc. Publishing as Prentice Hall. 41 Cash Payments by CheckReceiving ReportInvoiceInventoryPurchase OrderCheck or EFTCompany ACompany X 14322Copyright 2012 Pearson Education Inc. Publishing as Prentice Hall. 4

35、2Internal Control for Purchasing Segregate the following duties: Purchasing Receiving Approving and PayingCopyright 2012 Pearson Education Inc. Publishing as Prentice Hall. 43Payment PacketReceiving ReportInvoicePurchase OrderCopyright 2012 Pearson Education Inc. Publishing as Prentice Hall. 44Petty

36、 Cash Small fund to make minor purchases One employee is responsible for the accounting Custodian Set amount of cash Voucher prepared for each payment Sum of fund plus paid voucher should equal set amount Imprest systemCopyright 2012 Pearson Education Inc. Publishing as Prentice Hall. 45Construct an

37、d use a cash budgetCopyright 2012 Pearson Education Inc. Publishing as Prentice Hall. 46Budgeting Budget Financial plan to coordinate activities Cash budget Planning receipts and payments Steps: Start with beginning cash balance Add budgeted receipts and subtract budget payments Equals expected cash

38、 balance Compare cash available to budgeted cash balanceCopyright 2012 Pearson Education Inc. Publishing as Prentice Hall. 47Expected Cash BalanceIf expected cash is greater than minimum neededInvest excessIf expected cash is less than minimum neededConsider borrowingCopyright 2012 Pearson Education

39、 Inc. Publishing as Prentice Hall. 48Cash BudgetBeginning cash balanceBudgeted cash receipts: Collections from customers Dividends from investments Sale of plant and equipmentBudgeted cash payments: Purchases of inventory Operating expenses Purchase of long-term assets Payment of dividends Payment of long-term debtCash available (needed)Budgeted cash balance, end of per