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CHAPTER 8

INTERNAL CONTROL AND CASH الرقابة الداخلية على النقد. CHAPTER 8. Accounting Principles, Eighth Edition. Internal Control. Methods and measures adopted to: Safeguard assets. حماية الاصول

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CHAPTER 8

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  1. INTERNAL CONTROLAND CASH الرقابة الداخلية على النقد CHAPTER 8 Accounting Principles, Eighth Edition

  2. Internal Control • Methods and measures adopted to: • Safeguard assets. حماية الاصول • Enhance accuracy and reliability of accounting records. Reduce risk of: تعزيز الدقة ومدى الاعتماد على السجلات المحاسبية • Errors (unintentional) تقليل مخاطر الاخطاء غير المقصودة • Irregularities (intentional) او الاخطاء المقصودة LO 1 Define internal control.

  3. Internal Control The Sarbanes-Oxley Act هذا القانون متعلق بتعزيز الرقابة الداخلية تم استحداثة عام 2005 بعد سلسلة من الفضائح المحاسبية والتي تسببت بانهيار الكثير من الشركات الامريكية الكبرى • Companies must • develop principles of control over financial reporting. • تطوير مبادئ الرقابة الداخلية على التقارير المالية • continually verify that controls are working. • التحقق باستمرار من ان نظام الرقابة يعمل بشكل جيد Independent auditors must attest to the level of internal control. المدققون المستقلون يجب ان يصادقوا أي يفحصوا مستوى الرقابة الداخلية SOX created the Public Company Accounting Oversight Board (PCAOB). LO 1 Define internal control.

  4. Internal Control Principles of Internal Control مبادئ الرقابة الداخلية Illustration 8-1 • Measures vary with • size and nature of the business. • حجم الشركة وطبيعة عملها • management’s control philosophy. • فلسفة الادارة في الرقابة LO 2 Identify the principles of internal control.

  5. Internal Control Principles of Internal Control Illustration 8-3 PHYSICAL, MECHANICAL, AND ELECTRONIC CONTROLS Physical حسي واقعي Mechanical and Electronic ألي والكتروني LO 2 Identify the principles of internal control.

  6. Internal Control Principles of Internal Control • INDEPENDENT INTERNAL VERIFICATION • Records periodically verified by an employee who is independent. • Discrepancies reported to management. • OTHER CONTROLS • Bond employees. كفالة موظفين • Rotate employees’ duties and require vacations.تدوير الموظفين على الاعمال • Conduct background checks. اجراء التفتيش المرتجع LO 2 Identify the principles of internal control.

  7. Cash Controls Internal Control over Cash Receipts Establishment of Responsibility Only designated personnel are authorized to handle cash receipts (cashiers) Documentation Procedures Use remittance advice (mail receipts), cash register tapes, and deposit slips Independent Internal Verification Supervisors count cash receipts daily; treasurer compares total receipts to bank deposits daily Segregation of Duties Different individuals receive cash, record cash receipts, and hold the cash Physical, Mechanical, and Electronic Controls Store cash in safes and bank vaults; limit access to storage areas; use cash registers Other Controls Bond personnel who handle cash; require employees to take vacations; deposit all cash in bank daily Illustration 8-5 LO 3 Explain the applications of internal control principles to cash receipts.

  8. Cash Controls • Cashconsists of coins, currency, checks, money orders, and money on hand or on deposit in a bank. • النقد يتألف من العملات المعدنية والورقية والشيكات والأوامر البريدية والأموال تحت اليد او المودعة لدىالبنك • Cash receipts come from: • cash sales مبيعات نقدية • collections on account from customers • المتحصلات النقدية من العملاء • receipt of interest, rent, and dividends • مقبوضات الفوائد والإيجار وأرباح الاسهم • investments by owners الاستثمارات من قبل المالكين • bank loans القروض البنكيه • proceeds from the sale of noncurrent assets • المتحصل من عملية بيع الاصول غير المتداولة LO 3 Explain the applications of internal control principles to cash receipts.

  9. Mail Receipts • Control Procedures: اجراءات الرقابة • Mail receipts should be opened by two people, a list prepared, and each check endorsed. • بريد المقبوظات يجب ان يفتح من قبل موظفان, وإعداد قائمة , والشكات المصادقة • Copy of the list, along with the checks and remittance advices, sent to cashier’s department. • نسخة من القائمة, مع الشكات والتحويلات ترسل دائرة الصندوق • Cashier adds the checks to the over-the-counter receipts and prepares a daily cash summary and makes the daily bank deposit. • دائرة الصندوق, تعد ملخص النقدية اليومي • Copy of list sent to treasurer’s office for comparison with total shown on daily cash summary. • نسخة من القائمة , ترسل الى مكتب مدير الخزينة للمقارنة بالإجمالي الظاهر في ملخص النقدية اليومي LO 3 Explain the applications of internal control principles to cash receipts.

  10. Cash Controls Internal Control over Cash Disbursements • Generally, internal control over cash disbursements is more effective when companies pay by check, rather than by cash. • Applications: • Voucher system • Electronic funds transfers (EFT) system • Petty cash fund LO 4 Explain the applications of internal control principles to cash disbursements.

  11. Cash Controls Internal Control over Cash Disbursements Establishment of Responsibility Only designated personnel are authorized to sign checks (treasurer) Documentation Procedures Use prenumbered checks and account for them in sequence; each check must have an approved invoice Independent Internal Verification Compare checks to invoices; reconcile bank statement monthly Physical, Mechanical, and Electronic Controls Store blank checks in safes, with limited access; print check amounts by machine in indelible ink Segregation of Duties Different individuals approve and make payments; check signers do not record disbursements Other Controls Stamp invoices PAID Illustration 8-8 LO 4 Explain the applications of internal control principles to cash disbursements.

  12. Cash Controls Internal Control over Cash Disbursements • Petty Cash Fund - Used to pay small amounts. • Involves: صندوق المصاريف النثرية يستخدم لدفع المقادير القليلة • establishing the fund, تأسيس الصندوق • making payments from the fund, and الدفع يتم من خلاله • replenishing the fund. اعادة تزويد الصندوق LO 5 Describe the operation of a petty cash fund.

  13. Cash Controls E8-8Lincolnville Company uses a petty cash system. The fund was established on March 1 with a balance of $100. During March the following petty cash receipts were found in the petty cash box. خلال الشهر الوصولات التالية وجدت في الصندوق March 5 Stamp inventory طوابع $39 March 7 Freight-outمصاريف نقل بضاعة للخارج 21 March 9 Miscellaneous expenseمصاريف متفرقة 6 March 11 Travel expense مصاريف نقل 24 March 14 Miscellaneous expense 5 The fund was replenished أعيد تزويدهon March 15 when the fund contained $3 in cash عندما كان الصندوق يحتوي على 3 دولار فقط. On March 20, the amount in the fund was increased to $150. Instructions: Journalize the entries in March that pertain to the operation of the petty cash fund. LO 5 Describe the operation of a petty cash fund.

  14. Cash Controls E8-8The fund was established on March 1 with a balance of $100. March 1 Petty cash 100 Cash 100 E8-8 The fund was replenished on March 15 when the fund contained $3 in cash. March15 Postage expense 39 Freight-out 21 Miscellaneous expense 11 Travel expense 24 Cash over and short 2 Cash 97 LO 5 Describe the operation of a petty cash fund.

  15. Cash Controls E8-8 On March 20, the amount in the fund was increased to $150. March 20 Petty cash 50 Cash 50 LO 5 Describe the operation of a petty cash fund.

  16. Use of a Bank • Contributes to good internal control over cash. • تساهم في تعزيز الرقابة الداخلية على النقد • Minimizes the amount of currency on hand. • تقليل من حجم الاموال تحت اليد • Creates a double record of bank transactions. • خلق سجلين للنقدية واحد في الشركة والأخر في البنك • Bank reconciliation. اعداد مذكرة تسوية البنك LO 6 Indicate the control features of a bank account.

  17. Use of a Bank Illustration 8-10 Making Bank Deposits الايداع لدى البنك Authorized employee should make deposit. Bank Code Numbers Reverse Side Front Side LO 6 Indicate the control features of a bank account.

  18. Use of a Bank Writing Checks تحرير الشيكات Written order signed by depositor directing bank to pay a specified sum of money to a designated recipient. Illustration 8-11 Maker محرر الشيك Payee المدفوع لة Payer الدافع (البنك) LO 6 Indicate the control features of a bank account.

  19. Use of a Bank Illustration 8-12 • Bank Statements • Debit Memorandum اشعار مدين • Bank service charge • خصم خدمات البنك • NSF (not sufficient funds) • الرصيد غير كافي ( شكات مرتجعة) • Credit Memorandum اشعار دائن • Collect notes receivable. • تحصيل اوراق القبض • Interest earned. ايراد فائدة LO 6 Indicate the control features of a bank account.

  20. Use of a Bank Reconciling the Bank Account تسوية حساب البنك • Reconcile balance per books and balance per bank to their adjusted (corrected) cash balances. • تسوية الحساب في الدفاتر والحساب بالبنك للحصول على القيمة الصحيحة لرصيد النقدية • Reconciling Items: • Deposits in transit. ايداعات في الطريق لم تظهر في الكشف الوارد من البنك • وتسمى ايضا ( شيكات برسم التحصيل) وهي شيكات ارسلت الى البنك للتحصيل من • Outstanding checks. شيكات متداولة , سلمت للعملاء لكن لم تصرف من البنك • Errors. اخطاء • Bank memoranda. اشعارات البنك LO 7 Prepare a bank reconciliation.

  21. Use of a Bank Reconciliation Procedures Illustration 8-13 + Deposit in Transit - Outstanding Checks +- Bank Errors + Notes collected by bank - NSF (bounced) checks - Check printing or other service charges +- Book Errors CORRECT BALANCE CORRECT BALANCE LO 7 Prepare a bank reconciliation.

  22. Use of a Bank • E8-11The following information pertains to Family Video Company. • Cash balance per bank, July 31, $7,263. • Cash balance per books, July 31, $7,284. • July bank service charge not recorded by the depositor $28. • Deposits in transit, July 31, $1,500. • Bank collected $900 note for Family in July, plus interest $36, less fee $20.The collection has not been recorded by Family, and no interest has been accrued. • Outstanding checks, July 31, $591. • Instructions • Prepare a bank reconciliation at July 31. • Journalize the adjusting entries at July 31 on the books of Family Video Company. LO 7 Prepare a bank reconciliation.

  23. Use of a Bank E8-11 a) Prepare a bank reconciliation at July 31. Cash balance per bank statement $7,263 Add: Deposit in transit 1,500 Less: Outstanding checks (591) Adjusted cash balance per bank$8,172 Cash balance per books $7,284 Add: Collection of notes receivable 900 Collection of interest 36 Less: Bank service charge (28) Note collection fee (20) Adjusted cash balance per books$8,172 LO 7 Prepare a bank reconciliation.

  24. Use of a Bank E8-11 b) Journalize the adjusting entries at July 31 on the books of Family Video Company. Dr. Cr. July 31 Miscellaneous expense 28 Cash 28 July 31 Cash 916 Miscellaneous expense 20 Interest revenue 36 Notes receivable 900 Note: Adjusting journal entry includes only the adjustments to the cash balance per books. قيود التسوية فقط متعلقة بتسوية حساب النقدية في دفاتر المشروع LO 7 Prepare a bank reconciliation.

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