After completing this chapter you should be able to: Define internal control, identify the principles of internal control, explain the applications of internal control principles to cash receipts, explain the applications of internal control principles to cash disbursements,.and other contents. | CHAPTER 8 INTERNAL CONTROL AND CASH Accounting Principles, Eighth Edition Define internal control. Identify the principles of internal control. Explain the applications of internal control principles to cash receipts. Explain the applications of internal control principles to cash disbursements. Describe the operation of a petty cash fund. Indicate the control features of a bank account. Prepare a bank reconciliation. Explain the reporting of cash. Study Objectives 1. On the topic, “Challenges Facing Financial Accounting,” what did the AICPA Special Committee on Financial Reporting suggest should be included in future financial statements? Non-financial Measurements (customer satisfaction indexes, backlog information, and reject rates on goods purchases). Forward-looking Information Soft Assets (a company’s know-how, market dominance, marketing setup, well-trained employees, and brand image). Timeliness (no real time financial information) Internal Control The Sarbanes-Oxley Act Principles Limitations Cash Controls Use of a Bank Reporting Cash Cash equivalents Restricted cash Compensating balances Making deposits Writing checks Bank statements Reconciling the bank account Internal Control and Cash Control over cash receipts Control over cash disbursements Service Cost - Actuaries compute service cost as the present value of the new benefits earned by employees during the year. Future salary levels considered in calculation. Interest on Liability - Interest accrues each year on the PBO just as it does on any discounted debt. Actual Return on Plan Assets - Increase in pension funds from interest, dividends, and realized and unrealized changes in the fair market value of the plan assets. Amortization of Unrecognized Prior Service Cost - The cost of providing retroactive benefits is allocated to pension expense in the future, specifically to the remaining service-years of the affected employees. Gain or Loss - Volatility in pension expense can be caused by sudden and . | CHAPTER 8 INTERNAL CONTROL AND CASH Accounting Principles, Eighth Edition Define internal control. Identify the principles of internal control. Explain the applications of internal control principles to cash receipts. Explain the applications of internal control principles to cash disbursements. Describe the operation of a petty cash fund. Indicate the control features of a bank account. Prepare a bank reconciliation. Explain the reporting of cash. Study Objectives 1. On the topic, “Challenges Facing Financial Accounting,” what did the AICPA Special Committee on Financial Reporting suggest should be included in future financial statements? Non-financial Measurements (customer satisfaction indexes, backlog information, and reject rates on goods purchases). Forward-looking Information Soft Assets (a company’s know-how, market dominance, marketing setup, well-trained employees, and brand image). Timeliness (no real time financial information) Internal Control The Sarbanes-Oxley Act .
