ACCT 200 1st Edition Lecture 8 Outline of Last Lecture I Review of activity 2 answers II Classified balance sheet III Review of adjusting journal entries IV E 3 14 a b V Closing entries Outline of Current Lecture I 1 Step Income Statement II Activity 3 answers III Internal Controls IV E 4 4 V Cash VI Reconciling VII 4 2 A VIII Petty Cash Current Lecture Exam study tips Study guide on Blackboard go to office hours do LearnSmart self study review questions on Blackboard Course Material folder LearnSmart self study 1 Step Income Statement Revenues Expenses Total Expenses Net Income Activity 3 Answers Adjusting Journal Entries 1 2 3 4 Insurance expense dr 3000 prepaid insurance cr 3000 Depreciation expense dr 3000 accumulated depreciation cr 3000 Wages expense dr 3000 wages payable cr 3000 Unearned revenue dr 4900 service revenue cr 4900 Page 2 Net income 11 900 Total assets 123 900 Total current liabilities 28 000 Internal Controls Know basic what when and companies of Sarbanes Oxley Act SOX of 2002 Misuse of company resources includes wasting your time at work being on Facebook sending personal emails through work address etc Monitoring is when managers make sure employees are doing what they re supposed to do and aren t using loopholes Examples of control activities read in book too Preventive controls 1 2 3 4 Separation of duties 1 person per job to pinpoint who is causing problems Physical controls such as locks passwords security cameras Proper authorization limit access to information Employee management supervision and training Detective controls 1 Reconciliations keeping inventory 2 Performance reviews management giving feedback for improvement CEO and CFO are ultimately responsible for the company s internal controls Errors are more likely than fraud Who you hire is all important E 4 4 Which internal control is being violated 1 2 3 4 5 6 Reconciliations Physical controls Separation of duties Reconciliations Nothing violated Proper authorization good example of an exam question Cash Won t use cash equivalents in this class but they are mini short term investments to earn a little interest Separation of duties is very important in handling cash Cash disbursement payment Payments disbursements need proper authorization and invoice Read slides 4 19 and 4 20 know timing differences from slide 4 21 Reconciling Deposit in transit deposit taken to bank after the day s processing time deposit at 4 PM today get deposit in account tomorrow Slide 4 24 is important NSF is a bounced check from a customer non sufficient funds In this class banks won t make errors just companies Example of an error by a company recorded a deposit or check incorrectly Note receivable and related interest cash collected directly by the bank and then notification is sent to the company Service charges service fee expense for processing transactions debit and credit cards When adjusting the company s cash balance all items on the book side need journal entries Bank Side Book Side Start w bank statement balance Start w check book balance Add deposits in transit Deduct NSF Deduct outstanding checks Deduct service fee expenses charges Add notes collected by bank Add interest related to notes receivable errors made Adjusted bank balance KNOW NSF check dr accounts receivable cr cash Service fee expense dr service fee expense cr cash Adjusted book balance Notes receivable dr cash cr notes receivable 4 2A Deposits in transit 1100 Outstanding checks 1700 Bank statement balance 10 350 Check book balance 6800 NSF check 300 Interest earned 150 Note collected 5000 Interest on note 200 Service charges 100 ETF not recorded 1200 Check 323 was written for 2800 and recorded for 2000 Bank balance Book balance Bank balance 10 350 Check book balance 6800 deposit in transit 1100 NSF check 300 outstanding checks 1700 interest earned 150 note interest collected 5200 service fee expense 100 online check 1200 check error 800 Adjusted book balance 9750 Adjusted bank balance 9750 Petty cash Small amount of cash on hand not too much Know categories of cash flow for exam activities on cash flows statement
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