8: Fraud, Internal Controls, and Cash
- Page ID
- 2797
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- In this chapter, one of the major issues examined is the concept of fraud. Fraud can be defined in many ways, but for the purposes of this course we define it as the act of intentionally deceiving a person or organization or misrepresenting a relationship in order to secure some type of benefit, either financial or nonfinancial. We initially discuss it in a broader sense and then concentrate on the issue of fraud as it relates to the accounting environment and profession.
- 8.2: Define and Explain Internal Controls and Their Purpose within an Organization
- Internal controls are the systems used by an organization to manage risk and diminish the occurrence of fraud. The internal control structure is made up of the control environment, the accounting system, and procedures called control activities.
- 8.4: Define the Purpose and Use of a Petty Cash Fund, and Prepare Petty Cash Journal Entries
- One of the hardest assets to control within any organization is cash. One way to control cash is for an organization to require that all payments be made by check. However, there are situations in which it is not practical to use a check. It is not efficient for time and cost to write a check for small purchases, companies set up a petty cash fund, which is a predetermined amount of cash held on hand to be used to make payments for small day-to-day purchases.
- 8.6: Define the Purpose of a Bank Reconciliation, and Prepare a Bank Reconciliation and Its Associated Journal Entries
- The bank is a very important partner to all businesses. Not only does the bank provide basic checking services, but they process credit card transactions, keep cash safe, and may finance loans when needed.