(a)
Introduction:
The internal
The way asalesclerk may steal money from cash register using the store's return policy.
(b)
Introduction:
The internal control system of an organization provides a reasonable assurance regarding prevention or timely detection of errors or irregularities which can have material effects on the financial statements. It includes five elements namely control environment, risk assessment, control procedures, monitoring and information and security.
To discuss:
Theweaknesses in internal control in return policy that makes stealing of cash easier.
(c)
Introduction:
The internal control system of an organization provides a reasonable assurance regarding prevention or timely detection of errors or irregularities which can have material effects on the financial statements. It includes five elements namely control environment, risk assessment, control procedures, monitoring and information and security.
To explain:
If issuing store credit (instead of cash) for all merchandise returned without receipt reduce chance of theft. Also, discuss the pros and cons of issuing store credit (instead of cash).
(d)
Introduction:
The internal control system of an organization provides a reasonable assurance regarding prevention or timely detection of errors or irregularities which can have material effects on the financial statements. It includes five elements namely control environment, risk assessment, control procedures, monitoring and information and security.
The changes in store procedures regarding customer refunds which can improve internal control if current policy of issuing cash refund without receipt is maintained.
Want to see the full answer?
Check out a sample textbook solutionChapter 5 Solutions
Survey of Accounting (Accounting I)
- Buckner’s Clothing is a retail store specializing in women’s clothing. The store has established a liberal return policy for the holiday season in order to encourage gift purchases. Any item purchased during November and December may be returned through January 31, with a receipt, for cash or exchange. If the customer does not have a receipt, cash will still be refunded for any item under $75. If the item is more than $75, a check is mailed to the customer. Whenever an item is returned, a store clerk completes a return slip, which the customer signs. The return slip is placed in a special box. The store manager visits the return counter approximately once every two hours to authorize the return slips. Clerks are instructed to place the returned merchandise on the proper rack on the selling floor as soon as possible. This year, returns at Ramona’s have reached an all-time high. There are a large number of returns under $75 without receipts. How can sales clerks employed at Buckner’s…arrow_forwardInternal controls Using Wikipedia (wikipedia.com), look up the entry for Sarbanes-Oxley Act. Look over the table of contents and find the section that describes Section 404. What does Section 404 require of management's internal control report? Ramona's Clothing is a retail store specializing in women's clothing. The store has established a liberal return policy for the holiday season in order to encourage gift purchases. Any item purchased during November and December may be returned through January 31, with a receipt, for cash or exchange. If the customer does not have a receipt, cash will still be refunded for any item under $75. If the item is more than $75, a check is mailed to the customer. Whenever an item is returned, a store clerk completes a return slip, which the customer signs. The return slip is placed in a special box. The store manager visits the return counter approximately once every two hours to authorize the return slips. Clerks are instructed to place…arrow_forwardSelection of Effective Extended Procedures. The following lettered items are some “suspicions,” and you have been requested to select some effective procedures designed to confirmor repudiate the suspicions.a. The custodian of the petty cash fund may be removing cash on Friday afternoon to payfor weekend activities.b. A manager noticed that eight new vendors had been added to the purchasing department’s approved list after the assistant purchasing agent was promoted to purchasingmanager three weeks ago. The manager suspects all or some of them might be fictitiouscompanies set up by the new purchasing manager.c. The payroll supervisor may be stealing unclaimed paychecks of people who quit workand do not pick up the last check.d. Although no customers have complained, cash collections on accounts receivable aredown. The counter clerks may have stolen customers’ payments.e. The cashier may have “borrowed” money, covered it by holding each day’s deposit untilcash from the next day(s)’s…arrow_forward
- Internal controlsJimmy Pace has recently been hired as the manager of Jittery Jon'sCoffee Shop. Jittery Jon's Coffee Shop is a national chain of franchisedcoffee shops. During his first month as store manager, Jimmyencountered the following internal control situations: a. Jittery Jon's Coffee Shop has one cash register. Prior to Jimmy'sjoining the coffee shop, each employee working on a shift wouldtake a customer order, accept payment, and then prepare theorder. Jimmy made one employee on each shift responsible fortaking orders and accepting the customer's payment. Otheremployees prepare the orders.b. Because only one employee uses the cash register, that employeeis responsible for counting the cash at the end of the shift andverifying that the cash in the drawer matches the amount of cashsales recorded by the cash register. Jimmy expects each cashier tobalance the drawer to the penny every time no exceptions.c. Jimmy caught an employee putting a case of 1,000 single-servingtea bags in…arrow_forwardMoya Co. establishes a petty cash fund for payments of small amounts. The following transactions involving the petty cash fund occurred in January (the last month of the company’s fiscal year). Jan. 3 A company check for $150 is written and made payable to the petty cashier to establish the petty cash fund. 14 A company check is written to replenish the fund for the following expenditures made since January 3. a. Purchased office supplies for $14.29 that are immediately used. b. Paid $19.60 COD shipping charges on merchandise purchased for resale, terms FOB shipping point. Moya uses the perpetual system to account for inventory. c. Paid $38.57 to All-Tech for repairs expense to a computer. d. Paid $12.82 for items classified as miscellaneous expenses. e. Counted $62.28 remaining in the petty cashbox. 15 Prepared a company check for $50 to increase the fund to $200. 31 The petty cashier reports that $17.35 remains in the fund. A company check is written to replenish the fund for the…arrow_forwardWhich of the following reflects strong internal control? The person who opens the mail also makes the journal entry to record any customer payments received by mail. It takes two days to get a cheque written because of the approvals required. A company ships goods to customers right before year-end even though the customers have not ordered them. Physical inventory counts are not performed because the company uses a perpetual inventory system.arrow_forward
- Internal Controls Jimmy Pace has recently been hired as the manager of Jittery Jon’s Coffee Shop. Jittery Jon’s Coffee Shop is a national chain of franchised coffee shops. During his first month as store manager, Jimmy encountered the following internal control situations: a. Jittery Jon’s Coffee Shop has one cash register. Prior to Jimmy’s joining the coffee shop, each employee working on a shift would take a customer order, accept payment, and then prepare the order. Jimmy made one employee on each shift responsible for taking orders and accepting the customer’s payment. Other employees prepare the orders. I with Jimmy's method of handling this situation because Jimmy has the internal control principle of assignment of responsibility and the internal control principle of segregation of duties. b. Because only one employee uses the cash register, that employee is responsible for counting the cash at the end of the shift and verifying that the cash in the drawer matches the…arrow_forwardInternal Controls Jimmy Pace has recently been hired as the manager of Jittery Jon’s Coffee Shop. Jittery Jon’s Coffee Shop is a national chain of franchised coffee shops. During his first month as store manager, Jimmy encountered the following internal control situations: a. Jittery Jon’s Coffee Shop has one cash register. Prior to Jimmy’s joining the coffee shop, each employee working on a shift would take a customer order, accept payment, and then prepare the order. Jimmy made one employee on each shift responsible for taking orders and accepting the customer’s payment. Other employees prepare the orders. I ________with Jimmy's method of handling this situation because Jimmy has_______. the internal control principle of assignment of responsibility and ________ the internal control principle of segregation of duties . b. Because only one employee uses the cash register, that employee is responsible for counting the cash at the end of the shift and verifying that the cash…arrow_forwardApril showers sells goods on credit to most of it's customers. In order to control it's debtor collection system the company maintains a sale ledger control account. In preparing the accounts for the year to 31 October 2019 the accountant discovers that the total of all the personal accounts in the sales ledger account to sh.12,802 whereas the balance on the sales ledger control account is sh.12,550 Upon investigating the matter, the following errors were discovered. - sales for the week ending 27 March 2019 amounting to sh 850 had been ommited from the control account. - A debtor account balance of sh 300 had not been included in the list of balance . - Cash received of sh. 750 had been entered in a personal account as sh. 570. - Discounts allowed totalling sh.100 had not been entered in the control account. - A personal account balance had been undercast by sh.200. - A contra item of sh.400 with the purchase ledger had not been entered in the control account. - A bad debt of…arrow_forward
- April showers sells goods on credit to most of it's customers. In order to control it's debtor collection system the company maintains a sale ledger control account. In preparing the accounts for the year to 31 October 2019 the accountant discovers that the total of all the personal accounts in the sales ledger account to sh.12,802 whereas the balance on the sales ledger control account is sh.12,550 Upon investigating the matter, the following errors were discovered.- sales for the week ending 27 March 2019 amounting to sh 850 had been ommited from the control account.- A debtor account balance of sh 300 had not been included in the list of balance .- Cash received of sh. 750 had been entered in a personal account as sh. 570.- Discounts allowed totalling sh.100 had not been entered in the control account.- A personal account balance had been undercast by sh.200.- A contra item of sh.400 with the purchase ledger had not been entered in the control account.- A bad debt of sh.500 had…arrow_forwardA large retail enterprise has established a policy that requires the paymaster to deliver all unclaimed payroll checks to the internal audit department at the end of each payroll distribution day. This policy was most likely adopted toa. Ensure that employees who were absent on a payroll distribution day are not paid for that day.b. Prevent the paymaster from cashing checks that are unclaimed for several weeks.c. Prevent a bona fide employee’s check from being claimed by another employee.d. Detect any fictitious employee who may have been placed on the payrollarrow_forwardoperates an imprest system for petty cash. On 1 February 20X3, the float was $300. It was decided that this should be increased to $375 at the end of February 20X3. During February, the cashier paid $20 for window cleaning, $100 for stationery and $145 for coffee and biscuits. The cashier received $20 from staff for the private use of the photocopier and $60 for a miscellaneous cash sale. What amount was drawn from the bank account for petty cash at the end of February 20X3? A $185 B $260 C $315 D $375arrow_forward
- Financial Accounting: The Impact on Decision Make...AccountingISBN:9781305654174Author:Gary A. Porter, Curtis L. NortonPublisher:Cengage LearningCentury 21 Accounting Multicolumn JournalAccountingISBN:9781337679503Author:GilbertsonPublisher:CengageCollege Accounting (Book Only): A Career ApproachAccountingISBN:9781337280570Author:Scott, Cathy J.Publisher:South-Western College Pub
- Cornerstones of Financial AccountingAccountingISBN:9781337690881Author:Jay Rich, Jeff JonesPublisher:Cengage LearningCollege Accounting (Book Only): A Career ApproachAccountingISBN:9781305084087Author:Cathy J. ScottPublisher:Cengage Learning