{"id":3129,"date":"2020-10-08T23:14:39","date_gmt":"2020-10-08T23:14:39","guid":{"rendered":"https:\/\/courses.lumenlearning.com\/wm-financialaccounting\/?post_type=chapter&#038;p=3129"},"modified":"2020-11-17T21:50:02","modified_gmt":"2020-11-17T21:50:02","slug":"why-it-matters-accounting-for-cash","status":"publish","type":"chapter","link":"https:\/\/courses.lumenlearning.com\/suny-clinton-financialaccounting\/chapter\/why-it-matters-accounting-for-cash\/","title":{"raw":"Why It Matters: Accounting for Cash","rendered":"Why It Matters: Accounting for Cash"},"content":{"raw":"<h2>Why learn about\u00a0cash and cash equivalents?<\/h2>\r\n<img class=\"alignright wp-image-3494\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/5107\/2020\/10\/19160215\/scale-2522379_1280-1024x743.png\" alt=\"A scale with different amounts of coins on either side.\" width=\"400\" height=\"290\" \/>As we start to talk about the specifics of accounting for each line item on the trial balance, starting with cash, we also need to explore how those items, especially assets, are safeguarded. Since cash, which includes checking accounts, savings accounts, and other assets that are used like cash (including debit and credit cards), is one of the easiest assets to get \u201cmisplaced\u201d and is one of the most important assets for the business, this lesson is a good place to pause and start the discussion around internal controls\u2014both the structure of internal controls and the activities.\r\n\r\nIn general terms, the purpose of internal control is to ensure the efficient operations of a business, thus enabling the business to effectively reach its goals. An effective internal control structure includes a company\u2019s plan of organization and all the procedures and actions it takes to:\r\n<ul>\r\n \t<li>Protect its assets against theft and waste.<\/li>\r\n \t<li>Ensure compliance with company policies and federal law.<\/li>\r\n \t<li>Evaluate the performance of all personnel to promote efficient operations.<\/li>\r\n \t<li>Ensure accurate and reliable operating data and accounting reports.<\/li>\r\n<\/ul>\r\n<img class=\"alignright wp-image-3496\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/5107\/2020\/10\/19160413\/mark-995567_1920-1024x723.jpg\" alt=\"A white person's hand drawing a complex flow chart.\" width=\"401\" height=\"283\" \/>The internal control structure includes things like management\u2019s attitude toward safeguarding assets, the processes in place for monitoring (such as an internal review) and reporting, and the way the business is set up to allow for cross-checking and assigning responsibility. Part of your job as an accountant is to evaluate, establish, and monitor internal controls that do more than just maintain the accuracy and integrity of the accounting records.\r\n\r\nIn this section, we\u2019ll take a look at internal controls in general, and then specifically at what financial statements call \u201ccash and cash equivalents.\u201d While you are learning to record cash receipts and disbursements, you\u2019ll also learn to apply internal control concepts to those transactions and to the cash balance as well. Finally, you\u2019ll identify cash and cash equivalents on the financial statements and you\u2019ll see why they are usually listed first on a company's trial balance, general ledger, and balance sheet.","rendered":"<h2>Why learn about\u00a0cash and cash equivalents?<\/h2>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"alignright wp-image-3494\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/5107\/2020\/10\/19160215\/scale-2522379_1280-1024x743.png\" alt=\"A scale with different amounts of coins on either side.\" width=\"400\" height=\"290\" \/>As we start to talk about the specifics of accounting for each line item on the trial balance, starting with cash, we also need to explore how those items, especially assets, are safeguarded. Since cash, which includes checking accounts, savings accounts, and other assets that are used like cash (including debit and credit cards), is one of the easiest assets to get \u201cmisplaced\u201d and is one of the most important assets for the business, this lesson is a good place to pause and start the discussion around internal controls\u2014both the structure of internal controls and the activities.<\/p>\n<p>In general terms, the purpose of internal control is to ensure the efficient operations of a business, thus enabling the business to effectively reach its goals. An effective internal control structure includes a company\u2019s plan of organization and all the procedures and actions it takes to:<\/p>\n<ul>\n<li>Protect its assets against theft and waste.<\/li>\n<li>Ensure compliance with company policies and federal law.<\/li>\n<li>Evaluate the performance of all personnel to promote efficient operations.<\/li>\n<li>Ensure accurate and reliable operating data and accounting reports.<\/li>\n<\/ul>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"alignright wp-image-3496\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/5107\/2020\/10\/19160413\/mark-995567_1920-1024x723.jpg\" alt=\"A white person's hand drawing a complex flow chart.\" width=\"401\" height=\"283\" \/>The internal control structure includes things like management\u2019s attitude toward safeguarding assets, the processes in place for monitoring (such as an internal review) and reporting, and the way the business is set up to allow for cross-checking and assigning responsibility. Part of your job as an accountant is to evaluate, establish, and monitor internal controls that do more than just maintain the accuracy and integrity of the accounting records.<\/p>\n<p>In this section, we\u2019ll take a look at internal controls in general, and then specifically at what financial statements call \u201ccash and cash equivalents.\u201d While you are learning to record cash receipts and disbursements, you\u2019ll also learn to apply internal control concepts to those transactions and to the cash balance as well. Finally, you\u2019ll identify cash and cash equivalents on the financial statements and you\u2019ll see why they are usually listed first on a company&#8217;s trial balance, general ledger, and balance sheet.<\/p>\n\n\t\t\t <section class=\"citations-section\" role=\"contentinfo\">\n\t\t\t <h3>Candela Citations<\/h3>\n\t\t\t\t\t <div>\n\t\t\t\t\t\t <div id=\"citation-list-3129\">\n\t\t\t\t\t\t\t <div class=\"licensing\"><div class=\"license-attribution-dropdown-subheading\">CC licensed content, Original<\/div><ul class=\"citation-list\"><li>Why It Matters: Personal Accounting. <strong>Authored by<\/strong>: Joseph Cooke. <strong>Provided by<\/strong>: Lumen Learning. <strong>License<\/strong>: <em><a target=\"_blank\" rel=\"license\" href=\"https:\/\/creativecommons.org\/licenses\/by\/4.0\/\">CC BY: Attribution<\/a><\/em><\/li><\/ul><\/div>\n\t\t\t\t\t\t <\/div>\n\t\t\t\t\t <\/div>\n\t\t\t <\/section>","protected":false},"author":17,"menu_order":1,"template":"","meta":{"_candela_citation":"[{\"type\":\"original\",\"description\":\"Why It Matters: Personal Accounting\",\"author\":\"Joseph Cooke\",\"organization\":\"Lumen Learning\",\"url\":\"\",\"project\":\"\",\"license\":\"cc-by\",\"license_terms\":\"\"}]","CANDELA_OUTCOMES_GUID":"","pb_show_title":"on","pb_short_title":"","pb_subtitle":"","pb_authors":[],"pb_section_license":""},"chapter-type":[],"contributor":[],"license":[],"class_list":["post-3129","chapter","type-chapter","status-publish","hentry"],"part":122,"_links":{"self":[{"href":"https:\/\/courses.lumenlearning.com\/suny-clinton-financialaccounting\/wp-json\/pressbooks\/v2\/chapters\/3129","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/courses.lumenlearning.com\/suny-clinton-financialaccounting\/wp-json\/pressbooks\/v2\/chapters"}],"about":[{"href":"https:\/\/courses.lumenlearning.com\/suny-clinton-financialaccounting\/wp-json\/wp\/v2\/types\/chapter"}],"author":[{"embeddable":true,"href":"https:\/\/courses.lumenlearning.com\/suny-clinton-financialaccounting\/wp-json\/wp\/v2\/users\/17"}],"version-history":[{"count":5,"href":"https:\/\/courses.lumenlearning.com\/suny-clinton-financialaccounting\/wp-json\/pressbooks\/v2\/chapters\/3129\/revisions"}],"predecessor-version":[{"id":3497,"href":"https:\/\/courses.lumenlearning.com\/suny-clinton-financialaccounting\/wp-json\/pressbooks\/v2\/chapters\/3129\/revisions\/3497"}],"part":[{"href":"https:\/\/courses.lumenlearning.com\/suny-clinton-financialaccounting\/wp-json\/pressbooks\/v2\/parts\/122"}],"metadata":[{"href":"https:\/\/courses.lumenlearning.com\/suny-clinton-financialaccounting\/wp-json\/pressbooks\/v2\/chapters\/3129\/metadata\/"}],"wp:attachment":[{"href":"https:\/\/courses.lumenlearning.com\/suny-clinton-financialaccounting\/wp-json\/wp\/v2\/media?parent=3129"}],"wp:term":[{"taxonomy":"chapter-type","embeddable":true,"href":"https:\/\/courses.lumenlearning.com\/suny-clinton-financialaccounting\/wp-json\/pressbooks\/v2\/chapter-type?post=3129"},{"taxonomy":"contributor","embeddable":true,"href":"https:\/\/courses.lumenlearning.com\/suny-clinton-financialaccounting\/wp-json\/wp\/v2\/contributor?post=3129"},{"taxonomy":"license","embeddable":true,"href":"https:\/\/courses.lumenlearning.com\/suny-clinton-financialaccounting\/wp-json\/wp\/v2\/license?post=3129"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}