ACCT 301 Chapter Notes - Chapter 7: Product Return, Debits And Credits, Bank Reconciliation
Document Summary
Lo7 1: define what is meant by internal control and describe some key elements of an internal control system for cash receipts and disbursements. Internal control refers to the plan designed to encourage adherence to company policies and procedures; promote operational efficiency; minimize errors, thefts or fraud; and maximize the reliability and accuracy of accounting data. Key elements of an internal control system for cash receipts and disbursements include separation of record keeping from control of cash duties and the periodic preparation of a bank reconciliation. Lo7 2: explain the possible restrictions on cash and their implications for classification in the balance sheet. Cash can be informally restricted by management for a particular purpose. If restricted cash is available for current operations or to pay current liabilities, it"s classified as a current asset; otherwise, it"s classified as investments and funds or other assets. Lo7 3: distinguish between the gross and net methods of accounting for cash discounts.