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Follow the steps, as outlined in the ACC 201 Final Project Part I Guidelines and Rubric (attached), to complete the Accounting Cycle Report.
a) Identify the steps of the accounting cycle and provide a description of each step.
b) What role does each step play in the success of a business?
c) How could the omission of a step impact the success of a business? What strategies could be used to avoid this? Refer to the notes I posted on June 1, 2017 (Module 4) on Internal Controls.
Posted on: Thursday, June 1, 2017 5:07:46 AM EDT
Hello Everyone,
Below are notes I've prepared on Internal Controls to put things into perspective for you. You will need this information for your final papers-- The Accounting Cycle Report and Bank Memo, enjoy!
Internal Controls overfinancial reporting are simply procedures or strategies adopted by an entity to ensure that information reported in the financial statements are accurate and reliable, and free of material misstatements. It also involve measures to ensure compliance with laws and regulations as well as the safeguarding of assets. Internal controls over financial reporting are important because financial statements are relied upon by various stakeholders to make critical decisions (such as credit and investment decisions). Hence, the need to ensure the integrity of financial information and help the management of an entity to produce faithful financial statements that constitute better representations of actual circumstance. This gives stakeholders a better sense of a company's overall financial health.
For example, errors made in analyzing and journalizing transactions may flow through to the ledger accounts and the financial statements. To this end, entities may adopt the following key internal control strategies or procedures to ensure the integrity of financial information.
•Authorization and Approval of transactions,
•Review of work performed by employees,
•Reconciliations to ensuring that certain steps are done properly,
•Segregation of duties.
Authorization and Approval of transactions:
Authorization and approval requirements ensure that all transactions are carried out by personnel acting within the scope of their delegated authority. This helps to prevent invalid transactions from occurring. An entity’s policies and procedures should clearly identify which individuals have the authority to initiate, submit, reconcile or approve different types of transactions.
Review of work performed by employees:
Review of all transactions by knowledgeable and experienced personnel ensures that errors would be detected and corrected before posting to the ledger accounts. This is a proactive way of identifying and correcting errors that may flow through to the financial statements.
Reconciliations:
Reconciliations are performed to ensure certain steps are done properly. Also, reconciliation helps to detect and resolve errors. For example, reconciling the cash balance from the general ledger with the balance on the bank statement helps to identify and resolve discrepancies that may exist.
Segregation of duties:
Segregation of duties ensures that no single person has control over an entire process, to commit and conceal fraud, be it theft of assets or financial statement misrepresentation. As a good internal control practice, the following functions should be separated: Authorization of transactions, Recording of transactions, and Custody of assets. For example, to safeguard cash and prevent theft, segregation of duties over cash collections and disbursements can be adopted as an effective internal control. The objective is to have different people perform the following tasks:
d) What are the major financial statements that come out of the accounting cycle? Why are they important?
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