DQ1.
CHAPTER 8—Solutions
A system of internal control cannot overcome collusion because the system de-
CASH AND INTERNAL CONTROL
Discussion Questions
8-1
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4.
e
SE3. Limitations of Internal Control
Short Exercises
SE1. Internal Control
8-2
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To replenish the petty cash fund
SE7. Business Documents
SE8. Cash and Cash Equivalents
The proper order of the documents is: 6, 2, 1, 4, 7, 3, 5
8-3
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1. 6.
2. 7.
3. 8.
5.
5.
Prepared by Received by
1. a b
2. g d
3. b f
4. d e
5. f d
6. e f
7. c d
a a or c
c
d
c
e
b
E1A. Components of Internal Control
Exercises: Set A
E4A. Business Documents
E2A. Control Procedures
b, c
8-4
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1.
2.
3.
4.
$ 5,600
10,000
64,000
180,000
$259,600
$16,655.44
2,234.81
$18,890.25
6,808.16
$12,082.09
$12,091.94
9.85
$12,082.09
able in the store and pocketing the cash for the coupons. Businesses often have
extra coupons in the store for customers who request them.
All other things being equal, a decrease in both gross margin and ending inventory
The cashier in question may be turning in and ringing up discount coupons avail-
The large increase in sales returns and allowances immediately following year end
The 15 percent increase represents about one additional employee on the payroll
E5A. Use of Accounting Records in Internal Control (Answers may vary)
E6A. Cash and Cash Equivalents
Adjusted book balance, May 31
Money orders from customers
Cash and cash equivalents
Currency and coins on hand
E7A. Bank Reconciliation
Balance per bank, May 31
Adjusted bank balance, May 31
Deposits in checking accounts
Add deposits in transit
Less bank service charge
U.S. Treasury bills
Less outstanding checks
Balance per books, May 31
8-5
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2014
To replenish the petty cash fund
E8A. Imprest System
One way of improving this system would be for each sales representative to keep an ex-
pense receipt and a receipt from the petty cash custodian for each unused portion of
of duties.
The weak point in this system is having the petty cash custodian audit the sales repre-
E9A. Petty Cash Transactions
E10A. Management and Auditor Responsibility for Internal Control
8-6
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5.
2.
It is important that Jason take an active part in the management of the internal
monitor compliance with the procedures.
P1. Internal Control Components
Problems
ment by encouraging employees to follow the control procedures. Further, he can
a
8-7
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