Answered: Question 1 The following internal…

Financial Accounting: The Impact on Decision Makers

10th Edition

ISBN:9781305654174

Author:Gary A. Porter, Curtis L. Norton

Publisher:Gary A. Porter, Curtis L. Norton

Chapter6: Cash And Internal Control

Section: Chapter Questions

Problem 6.5MCP

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Question 1 The following internal control procedures are followed in Trisha’s Office Supplies: (a) Cash and Banking Johanne has been working as the cashier for Trisha’s Office Supplies for the last five years and apart from receiving and recording cash received, she also prepares banking and does deposits in the bank. (b)Debtors and Creditors There were several occasions when sales staffs have approved large credit sales and recently business’s bad debts have significantly increased. (c)Fixed Assets The business has three delivery vans and the drivers are allowed to keep the van after work and during the weekends. Recently it is noticed that there is high cost of van repairs and maintenance and fuel consumption while the sales have declined. (d)Inventory There are no perpetual records in Trisha’s Office Supplies, the store clerk does not keep records of goods received or issued. A physical count is done on a monthly basis by the store clerk under supervision. (e)Wages and Payroll Raniga is the wage clerk of the firm. His task is to calculate the wages earned by fifty employees from the time cards, prepare payroll register, write cheque and cash wages cheque, prepare pay envelopes and distribute the pay envelopes. Cheques are signed by the manager and accountant, employees sign on the payroll register when they receive their pay envelopes. Required: For each of the situations given on the previous page from (a) to (e), identify one internal control weakness and recommend one solution to each identified weakness.

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