The Office Procedures and Technology Chapter 6 Processing and Understanding Financial Information Copyright© 2007 Thomson/South-Western

Safeguarding Cash Preventive internal control Detective internal control Corrective internal control Fraud: imitate or counterfeit for illegal purposes Key Term Topic 6-1 Cash and Banking Procedures

Safeguarding Cash Processing Customer Payment Checks Mail Clerk Cashier Accounting Clerk Delivers checks to cashier Makes a list of checks received Prepares deposit slip and makes bank deposit Records customers’ payments Verifies that the total payments equals the total checks listed Separation of duties is a type of preventive internal control Topic 6-1 Cash and Banking Procedures

Sales Invoice Created when a company ships goods or performs services Includes information about the sale Includes seller’s and buyer’s contact information Accounts receivable: short-term debts owed to a company by others Key Term Topic 6-1 Cash and Banking Procedures

Sales Invoice Topic 6-1 Cash and Banking Procedures

Statement of Account Gives seller’s and buyer’s contact information Lists unpaid invoices as of a certain date Gives the total amount due Topic 6-1 Cash and Banking Procedures

Statement of Account Topic 6-1 Cash and Banking Procedures

Handling a Cash Drawer Prove cash Handle shortages or overages Proving cash: verifying that the proper amount of currency, checks, and bank card receipts are in a drawer Key Term Topic 6-1 Cash and Banking Procedures

Preparing Deposits Endorse checks Topic 6-1 Cash and Banking Procedures

Preparing Deposits Complete a deposit slip Topic 6-1 Cash and Banking Procedures

Making Deposits In person at a bank Electronically using an ATM Using a lockbox address Topic 6-1 Cash and Banking Procedures

Making Payments Review documents Purchase requisition Purchase order Receiving report Invoice from vendor Credit memorandum Accounts payable: short-term debts a company owes Key Term Topic 6-1 Cash and Banking Procedures

Voucher Key the vouchers Obtain authorized signatures File vouchers by payment date Tickler file: records or reminders arranged by date Key Term Topic 6-1 Cash and Banking Procedures

Voucher A voucher provides information and approval to make a payment Topic 6-1 Cash and Banking Procedures

Checks Check the tickler file and retrieve vouchers Compute a discount if applicable Fill in the checkbook stub or register Create the check Voucher check: check with an additional portion that gives a description of the payment Key Term Topic 6-1 Cash and Banking Procedures

Checks Complete the check register entry before preparing a check Topic 6-1 Cash and Banking Procedures

Special Checks Certified check Cashier’s check Bank draft Ordinary check Bank marks Certified and draws funds from account Cashier’s check Written by a bank on its own funds Purchase with cash or ordinary check Bank draft Drawn on a bank’s deposits in another bank Payable to a third party Topic 6-1 Cash and Banking Procedures

Electronic Funds Transfer Funds transferred using a computer network No physical exchange of currency or checks Used for direct deposit of payments such as wages Topic 6-1 Cash and Banking Procedures

Bank Account Records Bank statement Company records Shows activity in the account May be accompanied by canceled checks or notices Company records Checkbook or register Last month’s reconciliation Topic 6-1 Cash and Banking Procedures

Bank Statement Topic 6-1 Cash and Banking Procedures

Reconciling a Bank Account Purposes for the reconciliation Verify checks and withdrawals Identify outstanding deposits Identify outstanding checks Identify bank charges Determine the cash balance Topic 6-1 Cash and Banking Procedures

Reconciling a Bank Account Steps Record beginning balances Deduct bank charges from the register Add outstanding deposits to the bank balance Subtract outstanding checks from the bank balance Calculate adjusted balances Topic 6-1 Cash and Banking Procedures

Bank Reconciliation This bank reconciliation shows five outstanding checks Topic 6-1 Cash and Banking Procedures

Petty Cash Fund Used to pay small expenses Funds issued to the petty cashier Sales receipt required for each payment Petty cash receipt created Cash paid out Topic 6-1 Cash and Banking Procedures

Petty Cash Record A petty cash record shows receipts and payments Topic 6-1 Cash and Banking Procedures

Budget Detailed plan for using resources Prepared for a period of time Created for the entire company and for departments or groups Monitored periodically to identify variances Topic 6-2 Financial Reports and Payroll

Income Statement Created for a certain period of time Details the results of operations Revenues Expenses Net profit or loss Topic 6-2 Financial Reports and Payroll

Income Statement A projected income statement is part of a company’s financial plan Topic 6-2 Financial Reports and Payroll

Balance Sheet Presents the financial condition of a company on a certain date Lists assets, liabilities, and owner’s equity Topic 6-2 Financial Reports and Payroll

Balance Sheet This balance sheet shows projected figures Topic 6-2 Financial Reports and Payroll

Payroll Lists salary, wages, or other payments for work due to employees Procedures vary depending on the company type and size Deductions from earnings Required by law Voluntary Deductions: items that reduce gross pay Key Term Topic 6-2 Financial Reports and Payroll

W-4 Form Topic 6-2 Financial Reports and Payroll

Compensation Plans Salary Hourly Commission Combination plans Topic 6-2 Financial Reports and Payroll

Payroll Records Employee earnings record Payroll register Wage and Tax Statement (W-2 form) Topic 6-2 Financial Reports and Payroll

Employee Earnings Record Topic 6-2 Financial Reports and Payroll

Payroll Register Topic 6-2 Financial Reports and Payroll

Focus On … E-Commerce Planning Strategies Strategies widely used in the past Mass production Customization E-commerce is making mass customization popular Companies rely heavily on market research with this strategy Topic 6-2 Financial Reports and Payroll