Chapter 17

Internal Control

A set of rules and procedures that work to limit the opportunity for employee theft or malfeasance.

Deductible

An amount of loss that will not be paid by an insurance company.

Fidelity bonds

Bonds, also called dishonesty bonds, that repay employers for losses caused by dishonest or negligent employees.

Loss of key employees is a particularly acute risk for small businesses

Can be "hired away" by competitor with high salary

Insurance is determined:

Property's insurable value

Insurable Value

The amount of an asset for which a company will write an insurance policy.

Credit Insurance

covers abnormal losses from credit customers not paying their bills

Risk of Nonpayment

experienced by all businesses that offer credit

Medical

most highly desired form of insurance for most employees

Insurance

A contract between two or more parties in which one party agrees, for a fee, to assume the risk of another.

Co-insurance

A contract stipulation that requires a policyholder to carry insurance in an amount equal to a stated minimum percentage of the market value of the property insured.

Separation of Duties

A type of internal control that separates the physical control of an asset from the person accounting for that asset.

Insurance is determined:

Amount of co-insurance required

Insurance is determined:

Amount of deductible loss

Joint Venture

An agreement between two or more entities to pool resources in order to complete a project

Surety bonds

An agreement with an insurance or bonding company that will pay a specified amount in the event that the entity bonded fails to comply with specified contractual requirements.

Key Employees

Employees whose experience and skills are critical to the success of a business

Buyout Insurance

Insurance that provides money to owners of a business to buy the shares of any deceased owner from that owner's heirs.

Product Liability

Payment for injury or damage that occurs during the use of the business's products

Business Risk

The probability that your future business will be worse than you expect.

Personnel Insurance

available to protect both you and your employees from specific risks Life, Disability, Medical coverage

Tax Codes

include franchise or corporation taxes, income taxes, employee taxes, sales and use taxes, and property taxes

Coverages

Contractual provisions of insurance policies that specify what risks the insurance company is assuming.

Regulation of the Workplace

Laws and governmental rules that limit the freedom of business owners to manage their businesses as they please.

Tax Codes

Laws and regulations that specify the requirements of taxation

Insurance is determined:

Loss limits of the policy

Employee theft/pilfering

Misappropriation of business property by employees of that business.

Adverse Possession

occurs when the owner of real property does not enforce property rights and allows a nonowner to use the property as if it were his or her own.

Key person

protects you in the event that a key employee dies or is disabled and cannot work

Life insurance

provided to employees to provide security for their families