Policies and Procedures for Accounting and Financial Control

Policies and Procedures for Accounting and Financial Control

by LLP Coopers & Lybrand, Dawn K. Rhodes

Hardcover(RINGBOUND)

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Product Details

ISBN-13: 9780136811800
Publisher: Prentice Hall Professional Technical Reference
Publication date: 05/01/1992
Edition description: RINGBOUND
Pages: 384
Product dimensions: 10.85(w) x 11.69(h) x 2.14(d)

Table of Contents

How to Use This Manual v
Introduction vii
PART I POLICIES AND PROCEDURES 1(250)
Internal Control
3(6)
Effective Systems of Internal Control
5(4)
Determination of Validity
7(1)
Control of Documents
7(1)
Check for Accuracy
7(1)
Record in Appropriate Journals
8(1)
Check for Completeness
8(1)
Investigation of Unprocessed Transactions
8(1)
Segregation of Duties
8(1)
Performance of Monthly Reconciliations
8(1)
Timely Investigation of Differences
8(1)
Safeguarding of All Accounting Records
8(1)
Controls in an EDP Environment
9(28)
Application Controls
11(4)
Completeness of Input
11(1)
Accuracy of Input
12(1)
Authorization of Transactions
13(1)
Handling of Rejected Transactions
13(1)
Completeness and Accuracy of Computer-Generated Data/Transactions
14(1)
Completeness and Accuracy of Updating
14(1)
System/Program Implementation
15(6)
Management of System Development
15(1)
System Design
16(1)
Vendor-Supplied Packages
16(1)
System and Programming Standards
16(1)
Testing
16(1)
Cataloging
17(1)
Documentation
17(1)
Standing Data Conversion
18(1)
Transaction Data Conversion
18(1)
Set-Up of New Data
18(1)
Sample Documentation Index
19(2)
Program Maintenance
21(6)
Internally Maintained Applications
21(1)
Vendor Maintained Packages
22(1)
Cataloging
23(1)
Sample Service Request Form
24(1)
Sample Cataloging Authorization Form
25(2)
Computer Operations
27(6)
Scheduling
27(1)
Job Set-Up and Execution
27(1)
Use of Correct Data Files
28(1)
Operator Actions
28(1)
Activity Logs
28(1)
Back-Up and Recovery
29(2)
Sample Operations Schedule
31(1)
Sample Operator Incident Log
32(1)
Security
33(4)
Overall System Access Controls
33(1)
Security Policy
33(1)
Security Administration
34(1)
Dial-Up Access
34(1)
Physical Access
34(1)
Custody of Data and Programs Stored Off-Line
34(1)
Utilities and High-Level Programming Languages
35(1)
Bypassing Normal Access Controls
35(1)
Output
35(1)
Sample Access Request Form
36(1)
General Ledger and Journal Entries
37(12)
Maintaining an Effective Accounting System
39(4)
General Ledger Set-Up and Posting
39(1)
Arrangement of Account Titles
40(1)
Establishment of Contra Accounts
41(1)
Financial Information Adequacy
41(2)
General Ledger Activity
43(4)
Posting Monthly Activity to the General Ledger
43(1)
Documentation of Journal Entries Not Originating from Journals
44(1)
Adequate Documentation for All Journal Vouchers
45(1)
Authorization of Entries
45(1)
Review of All Authorized Vouchers
45(1)
Journal Voucher
46(1)
Adequate General Ledger Maintenance
47(2)
Preparation of Trial Balance
47(1)
Performance of Reconciliations
47(1)
Review of Trial Balance and Reconciliations
47(1)
Close of Income and Expense Items
48(1)
Cash
49(20)
Cash Management
51(4)
Maximizing Return on Idle Funds
51(1)
Expediting of Cash Receipts
51(1)
Collection Practices
52(1)
Deferring Disbursements
52(1)
Cash Budgets
52(1)
Short-Term Investment Vehicles
53(2)
Cash Receipts
55(2)
Opening the Mail
55(1)
Endorsement of Checks
55(1)
Bank Deposits
56(1)
Reconciliation of Cash/Checks Received to Bank Deposit
56(1)
Summarize Cash Receipts
56(1)
Disbursements from Bank Accounts
57(6)
Preparing Checks and Bank Transfers
57(1)
Check Signing
58(1)
Disbursement of Checks
58(1)
Cancel Supporting Documents
58(1)
Maintenance of Check Control Log
59(1)
Summarize Cash Disbursements
59(1)
Check Request Form
60(1)
Check Control Log
61(2)
Imprest and Similar Funds
63(2)
Disbursement of Funds
63(1)
Summarize Disbursements
63(1)
Reimbursement of Imprest Funds
63(1)
Payment of Payroll Through Imprest Funds
64(1)
Post Activity to the General Ledger
64(1)
Bank Reconciliations
65(4)
Preparing Bank Reconciliations
65(1)
Determination of Reconciling Items
65(1)
Review of Bank Reconciliation
66(1)
Bank Reconciliation
67(2)
Revenue Cycle
69(22)
Credit Policies
71(2)
Segregation of Duties
71(1)
Customer Credit Check
71(1)
Establishment of Credit Guidelines
72(1)
Credit Limit Increases
72(1)
Accounts Receivable Agings
72(1)
Security Interest in Items Sold
72(1)
Guidelines for Collection of Delinquent Accounts
72(1)
Customer Purchase Orders
73(6)
Customer Purchase Order Log
73(1)
Prenumbered Sales Order Forms
73(1)
Credit Department Approvals
74(1)
Sales Order Form as Requisition for Merchandise
74(1)
Sales Order Form as Packing Slip
74(1)
Shipping Log Preparation
75(1)
Sales Order Form
76(1)
Shipping Log
77(2)
Revenue Recognition
79(4)
Prenumbered Invoices
79(1)
Invoicing Procedures
79(1)
Sales Journal Review
79(1)
Sales Journal Summarization
80(1)
Sales Journal Posting to General Ledger
80(1)
Review of Shipping Log or Service Records
80(1)
Sales Invoice Form
81(2)
Accounts Receivable
83(2)
Posting Sales Invoices
83(1)
Posting as an Independent Function
83(1)
Timely Identification of Errors
83(1)
Posting of Adjustments
83(1)
Reconciliation of Accounts Receivable Subsidiary Ledger
84(1)
Review of Credit Balances
84(1)
Review of Cutoffs
84(1)
Customer Returns and Allowances
85(4)
Written Authorization
85(1)
Count and Examination of Returned Goods
85(1)
Issuance of Credit Memo
85(1)
Separate Check of Mathematical Accuracy
86(1)
Authorization of and Conditions for Allowances
86(1)
Approved Allowances
86(1)
Review of Credit Memo Numerical Sequence
86(1)
Valid But Unprocessed Claims
86(1)
Credit Memo
87(2)
Other Revenues
89(2)
Rental Income
89(1)
Royalties
89(1)
Deferred Income
89(1)
Barter Transactions
90(1)
Production Cycle
91(22)
Sales and Product Forecasts
93(2)
Preparation of Sales Forecasts
93(1)
Determination of Production Volume
93(1)
Review of Production Levels and Related Sales
94(1)
Cost-Flow Methods
95(2)
Determination of Appropriate Method
95(1)
Consistent Use of Method Selected
95(1)
Allocation of Production Costs---Overhead Application Rate
96(1)
Proration of Variance and Under/Over Absorbed Overhead
96(1)
Variance Analysis
96(1)
Review of Standard Costs and Overhead Rates
96(1)
Inventory Control
97(4)
Custodial Control of Operations
97(1)
Written Procedures for Inventory Custody
97(1)
Authorization for Movement of Inventory
97(1)
Independent Check of Transferred Items
98(1)
Reconciliation of Regularly Scheduled Physical Counts
98(1)
Materials Requisition Form
99(2)
Perpetual Inventory
101(2)
Perpetual Inventory Not Used
101(1)
Opening Inventory Balance
101(2)
Periodic Physical Inventory
103(6)
Proper Control of Physical Inventory
103(1)
Concurrent Physical Inventories
103(1)
Frequent Period Physical Counts
104(1)
Inventory Not on Premises
105(1)
Inventory Held in Public Warehouses
105(1)
Proper Identification of Inventory Ownership
105(1)
Indirect Materials and Supplies Inventory
106(1)
Reconciliation of Physical to Perpetual Inventory
106(2)
Inventory Tag Example
108(1)
Inventory Obsolescence
109(2)
Revalue Certain Inventory to Net Realizable Value
109(1)
Disposal of Obsolete or Excess Inventories
109(2)
Perpetual Inventory
111(2)
Adjustments to the General Ledger
111(1)
Physical Count Summary Reviewed for Accuracy
111(1)
Approval for Posting to General Ledger
111(2)
Prepaid Expenses
113(8)
Monitoring and Accounting for Prepaid Expenses
115(4)
Reviewing Incoming Invoices to Ensure Prepayment
115(1)
Maintenance of Asset Register
115(1)
Amortization Periods and Rates
116(1)
Preparation of Standard Journal Entries
116(1)
Asset Register
117(2)
Controlling Asset Balances
119(2)
Preparation of Reconciliations
119(1)
Investigation of All Discrepancies
119(1)
Supervisory Review of the Reconciliation
119(2)
Investments
121(22)
Investment of Idle Funds
123(10)
Investment Policy
124(1)
Authorization of Investment Vehicles
124(1)
Authorization of Investments
125(1)
Investment Purchases
125(1)
Investment Sales
125(1)
Investment Sales Gain or Loss
126(1)
Investment Sales Proceeds
126(1)
Investment Results Reports
126(1)
Reconciliation of Investment Accounts
126(1)
Investment Account Balances Agreed to Bank/Broker Statements
126(2)
Investment Control Log---Purchases
128(1)
Investment Control Log---Sales
129(1)
Investment Purchase/Sale Authorization Form
130(1)
Investment Gain/Loss Calculation Worksheet
131(2)
Safeguarding of Investments
133(4)
Investments Held by Authorized Agent
133(1)
Investment Certificate or Safekeeping Receipt
133(1)
Investment Control Log
134(1)
Physical Safeguards
134(1)
Investment Access Control Log
134(1)
Investment Storage Facility
134(1)
Preparation of Investment File
134(2)
Safekeeping Receipt Form
136(1)
Return on Investment
137(4)
Interest Income
137(1)
Common/Preferred Stock
137(1)
Premium/Discount on Bonds and Notes Receivable
138(1)
Investment Income Schedule
138(1)
Investment Summary Schedule
138(1)
Proper Valuation of "Marketable Equity Securities"
138(1)
Interest Income Worksheet
139(1)
Dividend Earnings Worksheet
140(1)
Investments With Significant Influence
141(2)
Equity Method of Accounting
141(1)
Investee Corporation Earnings
141(2)
Property, Plant, and Equipment
143(20)
Additions to Property, Plant, and Equipment
145(4)
Approval of Capital Budgeting
146(1)
Capital Asset Purchase Authorizations
146(1)
Approval of Appropriation Requests
146(1)
Long-Term Lease or Purchase
146(1)
Appropriations Request Form
147(2)
Accurate Records of Property, Plant, and Equipment
149(6)
Receipt and Identification of Capital Assets
149(1)
Review of Purchase Price Variances
149(1)
Maintenance of Detailed Fixed Asset Ledgers
149(1)
Depreciable Assets Net Acquisition Costs
150(1)
Posting to Detailed Ledger
150(1)
Reconciliation to General Ledger
150(1)
Investigation and Resolution of Differences
150(1)
Review of Differences
150(1)
Capitalization of Expenditures While Building
150(1)
Expenditures---Capitalization vs. Expense
151(1)
Fixed Asset Ledger
152(3)
Depreciation of Property, Plant, and Equipment
155(2)
Determination of Useful Life
155(1)
Determination of Depreciation Method
156(1)
Tax Deferrals Through Accelerated Depreciation Methods
156(1)
Existence of Capital Assets
157(2)
Identification and Record of Assets
157(1)
Comparison to Detailed Records
157(1)
Resolution of Differences
158(1)
Disposal of Capital Assets
159(4)
Documentation of Disposal
159(1)
Recording Disposal
159(1)
Fully Depreciated Assets
160(1)
Disposal Form
161(2)
Purchasing Cycle
163(34)
Determination of Needs
165(4)
Methods to Determine Needs
165(1)
Preparation of Requisitions for Routine Goods and Services
166(1)
Initiation of Requisitions for Specialized Services
167(1)
Initiation of Requisitions for Plant, Property, and Equipment
167(1)
Limitation on Purchases Through Imprest Funds
167(1)
Requisition Form
168(1)
Placement of Orders
169(6)
Capable Purchasing Personnel
169(1)
Establishment of Purchasing Guidelines
169(1)
Entering Into Purchase Commitments
170(1)
Preparation of Prenumbered Purchase Orders
170(1)
Reviewing for Accuracy
170(1)
Multiple Copy Purchase Order Forms
171(1)
Review of Unmatched Purchase Commitments
171(1)
Approval of Review
171(1)
Approval Limit Schedule
172(1)
Purchase Order
173(2)
Receipt and Acceptance
175(8)
Inspection of All Goods and Services
175(1)
Proper Communication Between Departments
176(1)
Preparation of Receiving Request
176(1)
Receiving Documentation Filed in Receiving and Sent to Purchasing
177(1)
Inspection and Approval of All Services Received
177(1)
Storing and Controlling of Goods
177(1)
Comparison of Receiving Log to Receiving Reports
178(1)
Approval and Review of Discrepancies in 3.7
178(1)
Receiving Report---Description and Quantity Manually Written
179(1)
Receiving Report---Copy of Purchase Order Used
180(1)
Receiving Control Log
181(2)
Establishment of Accounts Payable
183(6)
Establishment of Control Devices
183(1)
Preparation of the Voucher Package
183(1)
Procedures Performed on Voucher Package
184(1)
Processing of Freight Bills
184(1)
Guidelines for C.O.D. Purchases
185(1)
Recording Invoice in the Voucher Register or Purchase Journal
186(1)
Posting Vendor Invoices to the Accounts Payable Subledger
186(1)
Reconciliation of A/P Subledger to A/P General Ledger
187(1)
Review of Debit Balances in Accounts Payable
187(1)
Reconciliation of A/P Subsidiary Records to Suppliers' Records
187(1)
Approval and Review of Discrepancies in 4.10
187(1)
Voucher Sheet
188(1)
Return of Goods to Suppliers
189(6)
Preparation of a Rejection of Material Report
189(1)
Shipment of Goods Back to Vendor
190(1)
Preparation of a Debit Memorandum for Returned Goods
190(1)
Circulation of Debit Memo
191(1)
Comparison of Original Invoice Price to Debit Memo
191(1)
Review of Materials Rejection Reports
191(1)
Receipt of Credit Memorandum from Vendor
192(1)
Review of Unmatched Credit (Debit) Memorandum
192(1)
Review and Approval of Discrepancies in 5.7 and 5.8
192(1)
Materials Rejection Report
193(1)
Debit Memo
194(1)
Purchase Cut-Off
195(2)
Procedures for Proper Purchasing Cut-Off at End of Accounting Period
195(2)
Notes Payable and Long-Term Debt
197(22)
Financial Resource Requirements
199(4)
Notes Payable
199(1)
Installment and Mortgage Loans
200(1)
Bonds
200(1)
Long-Term Leases
201(2)
Assumption and Authorization of Debt
203(2)
Board of Directors Resolution
203(1)
Debt Approval and Agreement
203(1)
Records and Collateralization of Debt
203(2)
Safekeeping of Debt Agreements
205(2)
Original Agreements and Instruments
205(1)
Physical Safety of Agreements and Instruments
205(2)
Record of Debt
207(2)
Cash Received in Exchange for Debt
207(1)
Property, Plant, and Equipment in Exchange for Debt
207(1)
Bond Price Fluctuations
208(1)
Timely Interest Expense Accruals
209(2)
Interest Accrual Using Amortization Schedule
209(1)
Interest Accrual With Amortization Schedule
209(2)
Debt Payments
211(2)
Separate Principal and Interest Components
211(1)
Debt Payment Through General Ledger Distribution
211(1)
Debt Payment by Other Method
212(1)
Bond Discounts and Premiums
213(2)
Bond Amortization Schedule
213(1)
Timely Recording of Discounts and Premiums
213(2)
Current and Long-Term Debt Summary
215(2)
Debt Instrument Activity Summary
215(1)
Comparison to General Ledger
215(1)
Current Portion of Long-Term Debt
216(1)
Debt Covenants
217(2)
Debt Covenant Review Checklist
217(1)
Frequency of Checklist Preparation
217(1)
Noncompliance with Debt Covenants
218(1)
Accrued Liabilities
219(6)
Monitoring of Accrued Liabilities
221(2)
Establishing List of Expenses
221(1)
Preparation of Detailed Register
222(1)
When and How Accrued Liabilities Occur
222(1)
Recording the Accrual
222(1)
Review of the Account Balance
222(1)
Reconciliations and Accuracy
223(2)
Performance of Monthly Reconciliations
223(1)
Investigation of Discrepancies
223(1)
Supervisory Review of the Reconciliation
223(2)
Payroll Cycle
225(18)
Payroll and Personnel/Human Resources
227(2)
New Employees
227(1)
Compensation and Evaluation
228(1)
Vacation and Sick Pay
228(1)
Wages and Salaries
229(4)
Changes in Payroll Data
229(1)
Authorization of Changes in Payroll Data
229(1)
Comparison of Payroll Data to Personnel Files
230(1)
Personnel Action Form
231(2)
Timekeeping
233(4)
Maintenance of Time Records
233(1)
Overtime Approval
233(1)
Reconciliation of Payroll to Supporting Records
233(2)
Time Card
235(1)
Employee Time Sheet
236(1)
Payroll Calculation
237(2)
Time Cards
237(1)
Payroll Compared to Control Totals
237(1)
Independent Payroll Calculations
237(1)
Payroll Authorization
237(2)
Payment to Company Employees
239(2)
Distribution of Payroll
239(1)
Receipt Log for Cash Payments
239(1)
Comparison of Employee Check Endorsements to Signatures on File
239(1)
Unclaimed Payroll Checks
239(1)
Reconciliation of Payroll Bank Accounts
240(1)
Payroll Deductions
241(2)
Recording of Payroll Deductions
241(1)
Independent Check of Payroll Deductions
241(1)
Review of Payroll Deductions Payments to Third Parties
241(2)
Capital Stock
243(8)
Authorization, Issuance, and Maintenance of Capital Stock
245(2)
Approval by Board of Directors
245(1)
Issuance of Certificates
245(1)
Transferability of Stock Certificates
246(1)
Maintaining Permanent Evidence of Transfer
246(1)
Issuance of Stock When Full Payment is Received
246(1)
Outstanding Stock Procedures
247(2)
Maintenance of Stock Journal
247(1)
Preparation of Registrar Reports
247(1)
Posting to the General Ledger Accounts
248(1)
Capital Stock Records
249(2)
Reconciliation to General Ledger
249(1)
Examination of Unissued and Retired Stock Certificates
249(1)
Investigation of Discrepancies
249(1)
Approval of Reconciliation, Examination, and Investigation
249(2)
PART II FULL-SIZED FORMS 251(42)
Index of Forms
253(40)
PART III APPENDICES 293(58)
A. Sample Financial Statements
295(16)
ABC Service Company
297(4)
XYZ Retail Company and Subsidiary
301(5)
ACE Manufacturing Corporation
306(5)
B. Key Business Ratios and Other Analytical Measurements
311(6)
C. Computer Systems Selection and Implementation
317(12)
D. Three-Way Budget---The Aspects of Cash Management
329(22)
Index 351

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