Managerial Accounting
Class Notes and Lecture Outline
Internal Control 
Internal Control
  • objective is to safeguard assets and provide information to indicate if this is being accomplished
  • need to develop methods and procedures to ensure assets are safeguarded
  • need to collect information reporting on the efficiency of the designed methods and procedures
Basics of Internal Control
  1. preventative not detective
  2. control is not a panacea, management still needs to be vigilant
  3. system needs to be evaluated continuously
  4. effective employee selection and training
  5. responsibilities should be clearly written for all job categories and specific tasks
Controlling Purchases
  1. the purchase requisition
  2. the purchase order
  3. the invoice
  4. the receiving report
  5. invoice approval form or stamp
Inventory Control
  1. goods should be moved immediately to the proper storage area and secured
  2. storage personnel should not have access to the inventory records (and vice versa)
  3. physical inventory counts should be taken periodically and compared to the perpetual inventory records
Cash Receipts and Disbursements
  1. all disbursements should be made by check
  2. all disbursements should be supported with an approved invoice
  3. checks should be pre-numbered, sequentially and used in sequence
  4. the person preparing the check should not be the person signing the check
Payroll Control
  1. only top management should authorize salary and wage levels
  2. persons involved in hiring should not also prepare the payroll checks
  3. changes in employee pay need to be documented and approved
  4. procedures are needed to verify actual number of hours worked
  5. no overtime should be paid without approval
  6. payroll should have a separate bank account
  7. procedures are needed to handle paychecks not picked up by employees
  8. cash payroll should always be avoided


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this page is maintained by Reed Fisher
last updated January 15, 2011