Professional Documents
Culture Documents
Week 5
Week 5
What were the steps in the accounting cycle in Chapter 3? What is the difference between the accrual and the cash basis of accounting. What were the accounting principles? What were the 3 types of adjustments? What accounts do we close? What ratios did we look at?
Unearned Revenue a) Debit $10,000 b) Debit $14,000 c) Credit $10,000 d) Credit $14,000
Rent Revenue Credit $10,000 Credit $14,000 Debit $10,000 Debit $14,000
Chapter 4
Learning Objective 1
Learn about fraud and how much it costs
Fraud
Fraud is an intentional misrepresentation of facts, made for the purpose of persuading another party to act in a way that causes injury or damage to that party It is a huge problem and is getting bigger not only in Canada, but across the globe
Fraud
The two most common types of fraud that impact financial statements are: 1. Misappropriation of assets 2. Fraudulent reporting
Internal Control
A plan of organization and system procedures designed, implemented and maintained by company management and board of directors to deal with risks related to:
Reliability of financial records and reporting Ability to operate effectively and efficiently Compliance with legal requirements
Learning Objective 2
Adequate records
Limited access Proper approvals
Information technology
Safeguard controls
Adequate Records
All major groups of transactions should be supported by either hard copy documents or electronic records
Limited Access
Company policy should limit access to assets only to those persons or departments that have custodial responsibilities
Proper Approvals
No transaction should be processed without managements general or specific approval The bigger the transaction, the more specific the approval
Information Technology
The basic attributes of internal control of sophisticated IT does not change but the implementation procedures do.
Safeguard Controls
Fireproof vaults Burglar alarms Security cameras Loss prevention specialist Fidelity bonds Mandatory vacations Job rotation
Encryption
It is the transformation of data by a mathematical process into a form that is unreadable by anyone who does not have the secret decryption key.
Same key
Clear message
Firewall
It is a technique that limits access to hardware, software, or data to persons within a network.
Hackers
Firewall 1 Firewall 2 Firewall 3
A system of internal control that is too complex can hurt efficiency and control.
Question #2
The concept of internal control refers to:
a. Audit procedures used to detect theft b. Policies of the Accounting Standards Board c. Policies and procedures of a company designed to safeguard assets d. A method used to reconcile the bank statement
Learning Objective 3
Prepare and use a bank reconciliation
Companies should deposit all cash receipts and make all cash payments through the bank.
Question #3
A cheque was written for $542 to purchase supplies. The cheque was recorded in the journal as $425. The entry to correct the error:
a. b. c. d. Dr Supplies expense, Cr Cash, $117 Dr Supplies expense, Cr Cash, $425 Dr Supplies, Cr Cash, $117 Dr Supplies, Cr Cash, $425
Learning Objective 4
The cash drawer opens only when the sales clerk enters an amount on the keypad. At the end of the day, the cashier deposits the cash in the bank.
The record of cash receipts goes to accounting.
Question #4
All of the following are objectives of internal control except a. b. c. d. To safeguard assets To comply with legal requirements To maximize net income To ensure accurate and reliable accounting records
Learning Objective 5
Use a budget to manage your cash.
Cash Budget
Cash Budget For the Year Ended January 31, 2011 1. Cash balance, February 1, 2010 Estimated cash receipts: 2. Collections from customers 3. Interest and dividends on investments 4. Sale of store fixtures
Estimated cash payments: 5. Purchases of inventory 6. Operating expenses 7. Expansion of existing stores 8. Opening of new stores 9. Payment of long-term debt 10. Payment of dividends 11. Cash available (needed) before new financing 12. Budgeted cash balance, January 31, 2011 13. New financing needed $ 245.0 82.5 14.6 12.4 16.0 8.0
Assets Current assets: Cash and cash equivalents Temporary investments Accounts receivable
Learning Objective 6
Make ethical business judgment.
End of Chapter 4