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Internal Control and Cash Management: Definitions and Principles, Quizzes of Financial Accounting

Definitions and principles of internal control, technologies impact on internal control, limitations of internal control, cost-benefit principle, liquidity, cash, cash equivalent, effective cash management principles, control of cash disbursements, voucher system, basic bank services, electronic funds transfer, bank statement, and bank reconciliation.

Typology: Quizzes

2010/2011

Uploaded on 04/25/2011

joseph-eck
joseph-eck 🇺🇸

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TERM 1
Purpose of Internal Control
DEFINITION 1
1. Protect Assets 2. Ensure Reliable 3. Promote efficient
operations 4. Urge adherence to company policies
TERM 2
Principles of Internal Control
DEFINITION 2
1. Establish Responsibilities 2. Maintain adequate records 3.
Insure assets and bond key employees 4. Separate
recordkeeping from custody of assets 5. Divide responsibility
for related transactions 6. Apply technological controls 7.
Perform regular regular and independent reviews.
TERM 3
Technologies Impact on Internal Control
DEFINITION 3
1. Reduce processing errors 2. Allows more extensive testing of
records 3. Limits hard copy evidence of processing steps but can
electronically store additional evidenc e 4. Requires that crucial
separation of responsibilities be carefu lly distributed among fewer
employees. 5. Increased e-commer ce increases risks of credit card
theft, computer viruses and online im personation
TERM 4
Limitations of Internal Control
DEFINITION 4
1. Human Error and/or human fraud 2. Cost-benefit principle-
the costs of internal controls must not exceed their benefits
TERM 5
Cost-benefit
Principle
DEFINITION 5
The Costs of Internal controls must not exceed their benefits
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Purpose of Internal Control

  1. Protect Assets 2. Ensure Reliable 3. Promote efficient operations 4. Urge adherence to company policies TERM 2

Principles of Internal Control

DEFINITION 2

  1. Establish Responsibilities 2. Maintain adequate records 3. Insure assets and bond key employees 4. Separate recordkeeping from custody of assets 5. Divide responsibility for related transactions 6. Apply technological controls 7. Perform regular regular and independent reviews. TERM 3

Technologies Impact on Internal Control

DEFINITION 3

  1. Reduce processing errors 2. Allows more extensive testing of records 3. Limits hard copy evidence of processing steps but can electronically store additional evidence 4. Requires that crucial separation of responsibilities be carefully distributed among fewer employees. 5. Increased e-commerce increases risks of credit card theft, computer viruses and online impersonation TERM 4

Limitations of Internal Control

DEFINITION 4

  1. Human Error and/or human fraud 2. Cost-benefit principle- the costs of internal controls must not exceed their benefits TERM 5

Cost-benefit

Principle

DEFINITION 5 The Costs of Internal controls must not exceed their benefits

Liquidity

Refers to a company's ability to pay for its near term obligations TERM 7

Cash

DEFINITION 7 Includes currency and coins, deposit in bank and checking accounts, many savings accounts, and items that are acceptable for deposit in those accounts TERM 8

Cash Equivalent

DEFINITION 8 Short term, highly liquid investment assests meeting 2 criteria: 1. Readily convertible to a known cash amount 2. Sufficiently close to their maturity date so that market value is not sensitive to interest rate changes TERM 9

Effective Cash Management

Principles

DEFINITION 9

  1. Encourage collection of recievables 2. Delay payment of liabilities 3. Keep only necessary levels of assets 4. Plan expenditures 5. Invest excess cash TERM 10

Control of Cash

Disbursements

DEFINITION 10

  1. Require all expenditures be made by checks 2. Deny access to the accounting records to anyone, other than the owner, who has authority to sign checks 3. Use a voucher system of contro