ACCT

2 The following information is available for Hapley Company. The November 30 bank statement shows a $1,895 balance. The general ledger shows a $1,742 balance at November 30. A $795 deposit placed in the bank's night on November 30 bank statement. Outstanding checks amount to $638 at November 30. A customers $335 note was collected by the bank in November. A collection fee of $15 was deducted by the bank and the difference deposited in Hapley's account. A bank service charge of $10 is deducted by the bank & appears on the November 30 bank statement. How will the customer's note appear on Hapley's November 30 bank reconciliation? $320 appears as an addition to the book balance of cash $320 appears as a deduction from the book balance of cash $320 appears as an addition to the ban balance of cash $320 appears as a deduction from the bank balance of cash $335 appears as an addition to the bank balance of cash

$320 appears as an addition to the book balance of cash

Committee of Sponsoring Organizations

(COSO) the Treadway Commission (COSO) is a joint initiative to combat corporate fraud. COSO has established a common internal control model against which companies and organizations may assess their control systems. 343

Check Register

A check register, also called a cash disbursements journal, is the journal used to record all of the checks, cash payments, and outlays of cash during an accounting period. (online) 366

1 A company needs to replenish its $500 petty cash fund. Its petty cashbox has $75 cash and cash receipts of $420. The journal entry to replenish the fund includes

A debit to cash for $75 B credit to Cash for $75 C a credit to Petty Cash for $420 D a credit to Cash Over and Short for $5 E a debit to Cash Over and Short for $5

Invoice approval

AKA check authorization. Is a checklist of steps necessary for approving an invoice for recording & payment. 365

Day's sales uncollected

AKA say's sales in receivable. A measure of how quickly a company can convert its accounts receivable into cash. 362

Specific requirements of SOX

Executives & Bd of Directors must install effective internal controls. Auditors must evaluate internal controls Violators receive harsh penalties - up to 25 yrs in prison w/fines. Auditors work overseen by Public Comp Accting Oversight Board (PCAOB).

Internal control system

Mgrs use an internal control system to monitor & control business activities. Consists of the policies & procedures mgrs use to: Protect assets; ensure reliable accting; promote efficient ops; uphold company policies. 342

Triple threat of fraud

Opportunity; pressure; rationalization 345

Purchase requisition

The purchase requisition process starts with a purchase requisition or purchase request form, a document that is created by the purchaser and submitted to the department that controls finances. Consider this the part of the purchasing process where you get the thumbs up to purchase the goods and services you want (online) 351

Check

a document signed by the depositor instructing the bank to pay a specified amount of money to a designated recipient. 355

Purchase order

a document the purchasing department uses to place an order with a vendor (seller or supplier). 364

3 Using the information from question 2, what is the reconciled balance on Hapley's Nov 30 bank reconciliation? a.$2052 b. $1895 c.$1742 d. $2201 e. $1184

a. $2052

E-commerce risks

a. credit card number theft; b. computer viruses; c. impersonation 345

Establishes control for

a. verifying, approving, & recording obligations for eventual cash disbursements; b. issuing checks for payment of verified, approved & recorded obligations.

Cash equivalents

are short term, highly liquid investment assets meeting two criteria1. Readily convertible to a known cash amount & 2. sufficiently close to their due date so that their market value is not sensitive to interest rate changes. EX. money market funds 347

Signature card

bank employees use to verify signatures on checks. 355

Vendee

buyer 365

Liquid assets

cash & similar assets are called this because they can be readily used to settle obligations. 347

Principles of internal controls

certain fundamental internal control principles apply to all companies. Establish responsibilities. Maintain adequate records. Insure assets & bond key employees. Separate recordkeeping from custody of assets. Divide responsibility for related transaction. Apply technological controls. Perform regular & independent reviews

Canceled checks

checks the bank has paid & deducted from the from the customer's acct during the period. 356

Outstanding checks

checks written (or drawn) by the depositor, deducted on the depositor's records & sent to the payees but not yet received by the bank for payment at the bank statement date. 358

4. A company had net sales of $84,000 and accounts receivable of $6720. It's day's sales uncollected is a. 3.2 days b. 18.4 days c. 230.0 days d. 29.2 days e. 12.5 days

d. 29.2 days

Deposits in transit

deposits made & recorded by the depositor but not yet recorded on the bank statement. 358

Cash Over & Short

errors in making change are discovered from differences between the cash in a cash register & the record of the amount of cash receipts. The difference is reported in this account. Usually has a debit balance. 348

Cash

includes currency, coins & deposits in bank accounts, checking & savings accounts. 347

Voucher

internal document (or file) used to accumulate information to control cash disbursements & to ensure that a transaction is properly recorded.

Electronic funds transfer

is the electronic transfer of cash from one party to another. Used for convenience and low cost. 355

Invoice

itemized statement of goods prepared by the vendor listing the customer's name, items sold, sales price & terms of sale. Is also a bill sent to the buyer from the supplier. 365

Deposit ticket

lists items such as currency, coins and checks

Voucher register

once a voucher is approved & recorded in a journal. 366

Cash budget

projected cash receipts & cash disbursement are often summarized in this budget. 350

Liquidity

refers to a company's ability to pay for it's near term obligations. 347

Bank reconciliation

report explaining any differences between the checking account balance according to the depositor's records & balance reported on the bank statement. 357

Sarbanes-Oxley Act (SOX)

requires mgrs & auditors of companies whose stock is traded on an exchange (called public companies) to document & certify the system of internal controls. 342

Cost benefit principle

says that the costs of internal controls must not exceed benefits. 346

Voucher system

set of procedures & approvals designed to control cash disbursements & the acceptance of obligations. 350

Bank statement

shows the activity in an account. 356

Separation of duties

the work of one individual acts as a check on the other to prevent fraud & errors. It is not duplication of work.

Petty cash

to avoid the time & cost of writing checks for small amounts, a comp sets up petty cash fund to make small payments.

Receiving report

used within the company to notify the appropriate persons that ordered goods have been received & to describe the quantities & condition of the good. 365