Principles of Accounting Chapter 8
Terms
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- Audit trail
- The documentary evidence of written approval created by key people as they routinely review and verify an expenditure before payment is made.
- Bank reconciliation
- The process of accounting for the differences between the balance appearing on the bank statement and the balance of the Cash account in the company's records.
- Bonding
- The process of carefully checking an employee's background and insuring the company against theft by that person.
- Check
- A written order to a bank to pay the amount specified from funds on deposit.
- Check authorization
- A form prepared by the accounting department after it has compared the receiving report with the purchase order and the invoice. It permits the issuance of a check to pay the invoice.
- Check register
- In a voucher system, the journal in which voucher checks are listed as they are written.
- Control activities
- Policies and procedures established by management to ensure that the objectives of internal control are met.
- Control environment
- The overall attitude, awareness, and actions of management, as reflected in the company's philosophy and operating style, organizational structure, method of assigning authority and responsibility, and personnel policies and practices.
- Imprest system
- A system for controlling small cash disbursements by establishing a fund at a fixed amount and periodically reimbursing the fund by the amount necessary to restore the original cash balance.
- Information and communication
- The accounting system established by management and the communication of responsibilities with regard to the accounting system.
- Internal control
- All the policies and procedures a company uses to ensure the reliability of financial reporting, compliance with laws and regulations, and the effectiveness and efficiency of operations.
- Invoice
- A form sent to the purchaser by the vendor describing the goods delivered, the quantity, price, and terms of payment.
- Monitoring
- Management's regular assessment of the quality of internal control.
- Petty cash fund
- A fund for making small payments of cash when it is inconvenient to pay by check.
- Petty cash voucher
- A form signed by a person who receives a cash payment from a petty cash fund; lists the date, amount, and purpose of the expenditure.
- Purchase order
- A form prepared by a company's purchasing department and sent to a vendor describing the items ordered; the expected price, terms, and shipping date; and other shipping instructions.
- Purchase requistion
- a formal written request for a purchase, prepared by the requesting department in an organization and sent to the purchasing department.
- Receiving report
- A form prepared by the receiving department of a company describing the quantity and condition of goods received.
- Risk assessment
- The identification of areas in which risks of loss of assets or inaccuracies in the accounting records are high.
- Voucher
- a written authorization prepared for each business expenditure when it becomes a liability or obligation to pay.
- Voucher check
- a form of check, used in a voucher system, that describes the reason for issuing the check.
- Voucher register
- The book of original entry in which vouchers are recorded after they have been approved.
- Voucher system
- Any system that gives documentary proof of and written authorization for business transactions.