ACCT1501 Chapter Notes - Chapter 7: Bank Reconciliation, Internal Control, Financial Statement

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12 Nov 2020
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Topic 7 - internal control, bank reconciliation & Trotman, k. & gibbins, m. , 2009 financial accounting: an integrated approach, 4th edition, melbourne: Increases efficiency and effectiveness of operations: reliability of financial reporting. It is limited by: human mistakes, management override, employee collusion and fraud, costs vs. benefits. The 5 components of internal control include;[1: control activities - policies and procedures, risk assessment - identification and analysis of risks. Information and communication: monitoring - processes to assess system performance, control environment - ethics and integrity of all employees. Examples include;[2: top level reviews assess performance compared to budgets. Amount: replenishing the petty cash fund, dr expenses, cr cash - we remove all the vouchers and recognise the expenses now, errors the firm will use a cash shortage or overage account to recognised miscellaneous expenses or revenue. Bank reconciliation"s explain the differences between the amount in the cash account (ledger) and the bank statement.

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