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

2. 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

3. 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

4. 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

5. Sales Invoice
Topic 6-1 Cash and Banking Procedures

6. 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

7. Statement of Account
Topic 6-1 Cash and Banking Procedures

8. 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

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

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

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

12. 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

13. 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

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

15. 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

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

17. 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

18. 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

19. 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

20. Bank Statement
Topic 6-1 Cash and Banking Procedures

21. 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

22. 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

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

24. 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

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

26. 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

27. 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

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

29. 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

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

31. 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

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

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

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

35. Employee Earnings Record
Topic 6-2 Financial Reports and Payroll

36. Payroll Register
Topic 6-2 Financial Reports and Payroll

37. 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