Financial Accounting: The Impact on Decision Makers
10th Edition
ISBN: 9781305654174
Author: Gary A. Porter, Curtis L. Norton
Publisher: Cengage Learning
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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…
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…
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…
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Similar questions
- Internal Control Terminology A list of terms and another list of definitions and examples are presented below. Match the directly related definition or example with the each term. Required: Accounting controls Adequate documents and records Checks on recorded amounts Effective personnel policies Company policy requires receiving reports to be made for all deliveries by suppliers. Cash deposits are reconciled with cash register records at the end of every day. These are policies and procedures that govern the identification, measurement, recording, and communication of economic information. Every new employee is required to spend two days in training courses to learn company policies.arrow_forwardSelect Effective Extended Procedures. The following are some “suspicions”; you have been requested to select some effective extended procedures designed to confirm or deny the suspicions.Required:Write the suggested procedures for each case in definite terms so another person can know what to do.a. The custodian of the petty cash fund may be removing cash on Friday afternoon to pay for weekend activities.b. A manager noticed that eight new vendors were added to the purchasing department’s approved vendor list after the assistant purchasing agent was promoted to chief agent three weeks ago. She suspects all or some of them might be fictitious companies set up by the new chief purchasing agent.c. The payroll supervisor may be stealing unclaimed paychecks of employees who resigned and did not collect their last check.d. Although no customers have complained, cash collections on accounts receivable have decreased, and the counter clerks may have stolen customers’ payments.e. The cashier…arrow_forwardApplying internal control over cash receipts Sandra Kristof sells furniture for McKinney Furniture Company. Kristof is having financial problems and takes $650 that she received from a customer. She rang up the sale through the cash register. What will alert Megan McKinney, the controller, that something is wrong?arrow_forward
- Internal Controls Doris Tidwell and Jo Yost are both cash register clerks for Fuller's Organic Markets. Tom Ward is the store manager for Fuller's Organic Markets. The following is an excerpt of a conversation between Doris and Jo: Doris: Jo, how long have you been working for Fuller's Organic Markets? Jo: Almost five years this April. You just started two weeks ago … right? Doris: Yes. Do you mind if I ask you a question? Jo: No, go ahead. Doris: What I want to know is, have they always had this rule that if your cash register is short at the end of the day, you have to make up the shortage out of your own pocket? Jo: Yes, as long as I've been working here. Doris: Well, it's the pits. Last week I had to pay in almost $40. Jo: It's not that big a deal. I just make sure that I'm not short at the end of the day. Doris: How do you do that? Jo: I just shortchange a few customers early in the day. There are a few jerks that deserve it anyway. Most of the time, their…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_forwardCase Study: Hassam runs a fruit stall at the local market and at the end of each day he banks the cash in the cash register. the cash register records each sale and can provide a total for each day but Hassam believes that often the staffs are too busy and do not always enter the sales in the cash register but simply put the cash in the till. the total from the cash register is produced each month for the budiness's accountant to prepare financial statements. Recently, Hassam employed a university student to work on weekends and he is concerned that after this the daily amount banked seems to have decreased even though Hassam feels that sales have not really changed. the student often talks about how he spends his evenings at the casino in the hope of winning enough to pay for his university studies so that he doesn't have to work every weekend. reqiured: please answer this question by listing to Hassam 5 controls he could put in place to minimize the risk of one of his employees…arrow_forward
- 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.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 amount of cash sales recorded by the cash register. Jimmy expects each cashier to balance the drawer to the penny every time—no exceptions.c. Jimmy caught an employee putting a case of 1,000 single-serving tea bags in her…arrow_forwardJimmy 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. 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 amount of cash sales recorded by the cash register. Jimmy expects each cashier to balance the drawer to the penny every time—no exceptions. c. Jimmy caught an employee putting a case of 1,000 single-serving tea bags in…arrow_forwardINTERNAL CONTROL- Revenue CycleIris Plant owns and operates three floral shops in Magnolia,Texas. The accounting functions are performedmanually. Each of the shops has a manager who overseesthe cash receipts and purchasing functions for theshop. A clerk at the central shop pays all the bills andalso prepares payroll checks and maintains the generaljournal. Iris is seriously considering switching to a computerizedsystem. With so many information systempackages on the market, Iris is overwhelmed. RequiredAdvise Iris as to which business modules you think herorganization could find beneficial. Discuss advantages,disadvantages, and internal control issues.arrow_forward
- ETHICS CASE You are the assistant controller in charge of general ledger accounting at Hallasan Bottling. Your company has a large loan from an insurance company. The loan agreement requires that the company’s cash account balance be maintained at ₩200,000 or more, as reported monthly (amounts in thousands). At June 30, the cash balance is ₩80,000, which you report to Yoo Yun, the financial vice president. Yoo excitedly instructs you to keep the cash receipts book open for one additional day for purposes of the June 30 report to the insurance company. Yoo says, “If we don’t get the cash balance over ₩200,000, we’ll default on our loan agreement. They could close us down, put us all out of jobs!” Yoo continues, “I talked to Oconto Distributors (one of Hallasan’s largest customers) this morning. They said they sent us a check for ₩150,000 yesterday. We should receive it tomorrow. If we include just that one check in our cash balance, we’ll be in the clear. It’s in the mail!”…arrow_forwardWeek 7Richard Palm is the accounting clerk of Olive Limited. He uses the source documents such as purchase orders, sales invoices and suppliers’ invoices to prepare journal vouchers for general ledger entries. Each day he posts the journal vouchers to the general ledger and the related subsidiary ledgers. At the end of each month, he reconciles the subsidiary accounts to their control accounts in the general ledger to ensure they balance.Discuss the internal control weaknesses and risks associated with the above process.arrow_forwardInternal Controls Faith Cassen has recently been hired as the manager of Gibraltar Coffee Shop. Gibraltar Coffee Shop is a national chain of franchised coffee shops. During her first month as store manager, Faith encountered the following internal control situations: a. Faith caught an employee putting a case of 1,000 single-serving tea bags in his car. Not wanting to create a scene, Faith smiled and said, "I don’t think you’re putting those tea bags on the right shelf. Don't they belong inside the coffee shop?" The employee returned the tea bags to the stockroom. I with Faith's method of handling this situation because she has the internal control principle of safeguarding of assets. b. Gibraltar Coffee Shop has one cash register. Prior to Faith’s joining the coffee shop, each employee working on a shift would take a customer order, accept payment, and then prepare the order. Faith made one employee on each shift responsible for taking orders and accepting the customer’s…arrow_forward
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