Accounting Chapter 7: Internal Control and Cas

Bank Reconciliation

The analysis that details the items responsible for the difference between the cash balance reported on the bank statement and the balance of the cash account in the ledger

Cash Equivalents

Highly liquid investments that are usually reported with cash on the balance sheet

Cash short and over account

An account in which are recorded errors in cash sales or errors in making change causing the amount of actual cash on hand to differ from the beginning amount of cash plus the cash sales for the day

Compensating balance

A minimum cash balance required by some banks to be maintained in a bank account

Control environment

The overall attitude of management and employees about the importance of controls

days’ cash on hand

A measure of how long a company could survive if its sources of revenue were to decline significantly, computed as cash and short-term investments divided by daily cash operating expenses

Elements of internal control

The elements that together sustain internal control and include the control environment, risk assessment, control activities, information and communication, and monitoring

Internal control

The policies and procedures used to safeguard assets, ensure accurate business information, and ensure compliance with laws and regulations

petty cash fund

a special cash fund to pay relatively small amounts

Sarbanes-Oxley Act

An act passed by Congress to restore public confidence and trust in the financial statements of companies. Only applies to publicly traded companies. SOX emphasizes the importance of effective internal control

Special-purpose funds

Cash funds used for a special business need

Voucher

Any document that serves as proof of authority to pay cash or issue an electronic funds transfer, but for many businesses is a special form used to record data about a liability and the details of its payment