Identifying internal control weakness in cash receipts Pendley Productions makes all sales on credit. Cash receipts arrive by mail. Larry Chipcllo, the mailroom clerk, opens envelopes and separates the checks from the accompanying remittance advices. Chipello forwards the checks to another employee, who makes the daily bank deposit but has no access to the accounting records. Chipello sends the remittance advices, which show cash received, to the accounting department for entry in the accounts. Chipello’s only other duty is to grant sales allowances to customers. (A sales allowance decreases the customer’s account receivable.) When Chipello receives a customer check for $575 less a $45 allowance, he records the sales allowance and forwards the document to the accounting department. Requirements Identify the internal control weakness in this situation. Who should record sales allowances? What is the amount that should be shown in the ledger for cash receipts?
Identifying internal control weakness in cash receipts Pendley Productions makes all sales on credit. Cash receipts arrive by mail. Larry Chipcllo, the mailroom clerk, opens envelopes and separates the checks from the accompanying remittance advices. Chipello forwards the checks to another employee, who makes the daily bank deposit but has no access to the accounting records. Chipello sends the remittance advices, which show cash received, to the accounting department for entry in the accounts. Chipello’s only other duty is to grant sales allowances to customers. (A sales allowance decreases the customer’s account receivable.) When Chipello receives a customer check for $575 less a $45 allowance, he records the sales allowance and forwards the document to the accounting department. Requirements Identify the internal control weakness in this situation. Who should record sales allowances? What is the amount that should be shown in the ledger for cash receipts?
Accounting Information Systems
10th Edition
ISBN:9781337619202
Author:Hall, James A.
Publisher:Hall, James A.
Chapter2: Introduction To Transaction Processing
Section: Chapter Questions
Problem 19P
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Question
Identifying internal control weakness in cash receipts
Pendley Productions makes all sales on credit. Cash receipts arrive by mail. Larry Chipcllo, the mailroom clerk, opens envelopes and separates the checks from the accompanying remittance advices. Chipello forwards the checks to another employee, who makes the daily bank deposit but has no access to the accounting records. Chipello sends the remittance advices, which show cash received, to the accounting department for entry in the accounts. Chipello’s only other duty is to grant sales allowances to customers. (A sales allowance decreases the customer’s account receivable.) When Chipello receives a customer check for $575 less a $45 allowance, he records the sales allowance and forwards the document to the accounting department.
Requirements
- Identify the internal control weakness in this situation.
- Who should record sales allowances?
- What is the amount that should be shown in the ledger for cash receipts?
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