Evaluating internal control over cash payments Gary’s Great Cars purchases high-performance auto parts from a Nebraska vendor. Dave Simon, the accountant for Gary’s, verifies receipt of merchandise and then prepares, signs, and mails the check to the vendor. Requirements Identify the internal control weakness over cash payments. What could the business do to correct the weakness?

Evaluating internal control over cash payments Gary’s Great Cars purchases high-performance auto parts from a Nebraska vendor. Dave Simon, the accountant for Gary’s, verifies receipt of merchandise and then prepares, signs, and mails the check to the vendor. Requirements Identify the internal control weakness over cash payments. What could the business do to correct the weakness?

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter8: Fraud, Internal Controls, And Cash

Section: Chapter Questions

Problem 5MC: There are several elements to internal controls. Which of the following would not address the issue...

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There are several elements to internal controls. Which of the following would not address the issue of having cash transactions reported in the accounting records? A. One employee would have access to the cash register. B. The cash drawer should be closed out, and cash and the sales register should be reconciled on a prenumbered form. C. Ask customers to report to a manager if they do not receive a sales receipt or invoice. D. The person behind the cash register should also be responsible for making price adjustments.
Evaluating internal control over cash payments Gary’s Great Cars purchases high-performance auto parts from a Nebraska vendor. Dave Simon, the accountant for Gary’s, verifies receipt of merchandise and then prepares, signs, and mails the check to the vendor. Requirements 1. Identify the internal control weakness over cash payments. 2. What could the business do to correct the weakness?
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Answer the following questions about internal control over cash payments:1. Payment by check includes three controls over cash. What are they?2. Suppose a purchasing agent receives the goods that she purchases and also approves payment for those goods. How could a dishonest purchasing agent cheat the company? Howdo companies avoid this internal control weakness?
Applying internal control over cash payments by check A purchasing agent for Franklin Office Supplies receives the goods that he purchases and also approves payment for the goods. Requirements How could this purchasing agent cheat his company? How could Franklin avoid this internal control weakness?
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Each situation below describes an internal control weakness in the cash payments process. Identifywhich of the five internal control principles is violated, explain the weakness, and then suggest achange that would improve internal control.a. The warehouse clerk is responsible for ordering inventory when levels become low and advising the accounting department to issue a payment to the supplier when ordered goods arereceived.b. For each purchase, the accountant compares the purchase order (prepared by the purchasing manager) to the receiving report (prepared by warehouse employees) and then attachesthese documents to the corresponding supplier invoice and files them by supplier name. Theaccountant then prepares a check, which the owner merrily signs and sends to the mail clerkfor mailing.c. The check-signing machine is stored with a supply of blank checks in the lunch room closet.d. Purchase orders can be approved by the purchasing manager, accountant, or warehouse supervisor,…
Assume you are considering an entity’s internal controls over credit sales and cash collection. System documentation was accomplished through a questionnaire and written narratives and, in conjunction with a transaction walk-through, revealed the following potential weaknesses in internal control, some of which, depending on their severity, could prompt you to set control risk at the maximum. a. New customers are not approved before ordered good are shipped. b. Sales prices vary from customer to custom. c. No approval is required for returned goods from customers. d. Subsidiary accounts receivable records do not always agree with the general ledger control account. e. Blank checks are left unprotected in an unlocked safe. Required: For each potential weakness, indicate a control or controls that management could implement to reduce the likelihood of errors or frauds. Case 4 (Adapted) During your audit of Grace Company’s December 31, 2013 financial…
What is the primary reason why most businesses want to sell on a credit basis if it is preferable for sellers to collect advance payments from customers and/or accept cash transactions only? Give and explain a credit/collection-related task of (a) credit manager and (b) collections manager.
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E8B. ACCOUNTING CONNECTION Developing a convenient means of reimbursing sales representatives with cash for their incidental expenses, such as for meals and supplies, is a problem many companies face. Under one company's plan, the sales representatives submit the receipts for reimbursement to the petty cash custodian. The representative then receives cash from the petty cash fund. What is the weak point in this system? What fundamental principle of internal con- trol is being ignored? What improvement in the procedure can you suggest?
Explain the primary goal of maintaining a cash book. Use a case study company of your own choice to demonstrate how such a goal (Your arguments must only relate to the main goal of a cash book) can be attained. Provide examples as approperiate Clearly explain how a cash book can be integrated in the extraction/development of the Trial Balance. Are trade discounts included in the cash book? If not or if yes, explain why Are credit transactions included in the cash book? If not or if yes, explain why Ledgers help to organize accounting information into categories normally known as ‘’classes’’. With examples explain the nature and differences between revenue and capital ledgers Using two revenue and capital ledgers, explain how you will treat them in the trial balance. Explain the treatment of the proprietor’s additional contribution to an already existing business. In addition, explain the underlying accounting principle you will apply in answering this question. Thames Cotton Mills…