Accounting 201 Rephrase in own words

1.Financial Pressure, Opportunity, and Rationalization.

2.Establishment of responsibility indicates assigned and authorized responsibility to specific employees to handle cash receipts. For example, Cashier.

Segregation of duties indicates separate having custody of assets, authorization of assets, and recordkeeping of assets conducted by different individuals. For example, Accounting Employee A maintains cash balance per books and Assistant Cashier B maintains custody of cash on hand.

Documentation procedures indicate all prenumbered documents should be accounted for. Then, forward source documents for accounting entries to the accounting department. For example, Deposit slips.

Physical controls are related to safeguarding of assets, and enhance the accuracy and reliability of the accounting records. For example, Safes.

Independent internal verification indicates the review of data is verified by an employee who is independent, and any discrepancies should be reported to the treasurer. For example, Assistant treasurer.

Human resource controls are bond employees who handle cash, rotate employees’ duties and require vacations, also conduct background checks.

Limitations of internal control are human element, collusion, and size of the business.

3.Preparing a bank reconciliation:

Step 1: Deposits in transit (+)

Step 2: Outstanding checks (-)

Step 3: Bank errors (+/-)

Apr.30 Cash(Debit) 1035

Accounts receivable(Credit) 1035

Apr.30 Cash(Debit) 36

Account payable—Andrea company(Credit) 36

Apr.30 Accounts receivable—J.R. Baron(Debit) 425.60

Cash(Credit) 425.60

Apr.30 Bank charge expense(Debit) 150

Cash(Credit) 150

4. Cash reported in balance sheet and statement of cash flow.

Restricted cash is for a specific purpose, such as bank loan requirement or paying off debt, so it’s not available to spend or for general business use. This will appear on the balance sheet as other restricted cash or other assets. If it’s short-term, it will be classified as current assets. If it’s long-term, it will be classified as non-current assets.

Negative cash balance is when the cash account in a company’s general ledger has a credit balance. In this case, a negative cash balance will be reported as a current liability in the balance sheet.

5. First, increase the speed of receivables collection. Second, keep inventory levels low.Third, monitor payment of liabilities. Fourth, plan the timing of major expenditures. Lastly, invest idle cash.