Introductory Financial Accounting - Chapter 5: Sale Revenue, Receivable and Cash, Part 2

These flashcards cover key terms and concepts related to internal control, cash management, and financial accounting from Chapter 5 of the lecture.

Internal Control

A set of policies and procedures adopted within a company to ensure the safety of assets, accuracy of financial reporting, effective operations, and compliance with laws.

Fraud

An intentional act to misappropriate assets or misstate financial statements, often involving deceptive practices by employees or management.

Cash Equivalents

Short-term, highly liquid investments that are readily convertible to known amounts of cash and subject to insignificant risk of changes in value.

Bank Reconciliation

A schedule that explains the difference between the ending cash balance in the company's records and the ending cash balance reported by the bank.

Separation of Duties

The practice of assigning different responsibilities to different employees to reduce the risk of fraud by ensuring no single employee has control over all aspects of a financial transaction.

Outstanding Cheques

Cheques that have been issued and recorded by a company but have not yet been paid or cleared by the bank.

Documentation

Evidence in the form of documents that transactions occurred, such as receipts and delivery documents.

Control Environment

The values of the organization that are set and enforced at the top level, forming the foundation of the internal control system.

Bad Debts Expense

An expense incurred when receivables are estimated to be uncollectible.

Allowance for Doubtful Accounts (AFDA)

A contra-asset account used to estimate the amount of accounts receivable that may not be collectible.