The Office Procedures and Technology Chapter 6 Processing and Understanding Financial Information Copyright 2003 by South-Western, a division of Thomson Learning

Safeguarding Cash  Preventive internal control  Detective internal control  Corrective internal control Topic 6-1 Cash and Banking ProceduresSlide 2 Fraud: imitate or counterfeit for illegal purposes Key Term Separation of duties is a type of preventive internal control

Billing Customers  Sales invoice Created when a company ships goods or performs services Includes information about the sale Includes seller’s and buyer’s contact information Topic 6-1 Cash and Banking ProceduresSlide 3  Statement of account Gives seller’s and buyer’s contact information Lists unpaid invoices as of a certain date Gives the total amount due

Receiving Payments  Accounts receivable Short-term debts owed to a company by others  Handling the cash drawer Proving cash Handling shortages or overages Topic 6-1 Cash and Banking ProceduresSlide 4 Proving cash: verifying that the proper amount of currency, checks, and bank card receipts are in a drawer Key Term  Preparing deposits Endorse checks Complete a deposit slip  Making deposits In person at a bank Electronically using an ATM Using a lockbox address

Making Payments  Accounts payable Short-term debts a company owes  Review documents Purchase requisition Purchase order Receiving report Invoice from vendor Credit memorandum  Prepare vouchers Key the vouchers Obtain authorized signatures File vouchers by payment date Topic 6-1 Cash and Banking ProceduresSlide 5 Tickler file: records or reminders arranged by date Key Term A voucher provides information and authorization to make a payment

Making Payments  Prepare checks Check the tickler file and retrieve vouchers Compute a discount if applicable Fill in the checkbook stub or register Create the check Topic 6-1 Cash and Banking ProceduresSlide 6 Voucher check: check with an additional portion that gives a description of the payment Key Term Complete the check register entry before preparing a check  Special checks Certified check Cashier’s check Bank draft  Computer-generated checks Created using an accounts payable system Security is an important consideration  Electronic funds transfer No physical exchange of currency or checks Funds transferred using a telecommunications network

Reconciling a Bank Account  Bank statement Shows activity in the account May be accompanied by canceled checks or notices  Company records Checkbook or register Last month’s reconciliation  Purposes for the reconciliation Verify checks and withdrawals Identify outstanding deposits Identify outstanding checks Identify bank charges Determine the cash balance  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 ProceduresSlide 7 This bank reconciliation shows five outstanding checks

Petty Cash Fund  Establishing the fund Amount determined by the department head Funds issued to the petty cashier  Making payments Sales slip or other documentation required for each payment Petty cash receipt created Cash paid out  Keeping a record Records kept manually or by computer Amounts for receipts and payments recorded Topic 6-1 Cash and Banking ProceduresSlide 8 A petty cash record shows receipts and payments

Financial Reports  Budget Detailed plan for allocating 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 PayrollSlide 9  Income statement Created for a certain period of time Details the results of operations including revenues, expenses, and net profit or loss A projected income statement is part of a company’s financial plan  Balance sheet Presents the financial condition of a company on a certain date Lists assets, liabilities, and owner’s equity This balance sheet shows projected figures

Payments for Wages and Salaries  Payroll List of amounts of salary, wages, or other payments for work due to employees Procedures vary depending on the workforce size and the degree of automation used Topic 6-2 Financial Reports and PayrollSlide 10 Deductions: items that reduce gross pay Key Term  Compensation plans Salary Hourly Commission Combination plans  Deductions from earnings Required by law Voluntary

Payroll Records  Employee earnings record  Payroll register  Wage and Tax Statement (W-2 form) Topic 6-2 Financial Reports and PayrollSlide 11

Focus On … Ecommerce and Planning Strategies  Ecommerce creates a need for new planning strategies  Mass production and customization strategies have been widely used in the past  Ecommerce is making mass customization popular  Companies rely heavily on market research to predict sales and supply needs Topic 6-2 Financial Reports and PayrollSlide 12