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1.
2.
Recording transactions The accountant updates the perpetual inventory records
daily for receipts and sales.
if the customer has a "paid" invoice received from the cashier.
Authorization The warehouse attendant can release a printer to a customer only
P2. Internal Control Procedures
Documents and records The principal documents are sales invoices and inventory
ployees less likely.
ventory records. These procedures are no guarantee, but they make theft by em-
Assets are often vulnerable to employee theft. In the case of Transco Printers, the
8-8
© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.
1. a.
Third, Hazel hires bonded employees who are experienced. Fourth, Hazel provides train-
ing in procedures. These procedures are no guarantee, but they lessen the risk of loss of
cash in the cashier function.
Authorization Authorization for credit card sales is obtained by scanning the
P3. Internal Control Activities
8-9
© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.
1.
2. 2014
Note and interest collected by bank
Interest on average bank account
balance
To correct an incorrect entry for
purchase of merchandise
$1,920 – $1,380 = $540
Bank service charge for May
NSF check of Eva Mendez returned
by bank
3.
The adjusted cash balance of $54,485.60 should appear on the balance sheet.
May 31, 2014
Cash
Sedona, Inc.
Bank Reconciliation
P4. Bank Reconciliation
Cash
Cash
Interest Income
8-10
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4.
A bank reconciliation is a necessary internal control because events and items such
P4. Bank Reconciliation (Concluded)
8-11
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1.
2.
To replenish the petty cash fund
2014
P5. Imprest (Petty Cash) Transaction
is established, and the expenditures may be audited both for the amount of the
fund and for authorized reasons for the expenditures.
$200, and require a signed receipt from the volunteer every time a disbursement
is made. Each receipt should contain the reason for the expenditure. The total of
the receipts and the cash on hand should always equal $200. A single person,
such as a receptionist, should be in charge of the fund. In this way, accountability
The charity may establish an imprest system with a fixed amount of funds, say
8-12
© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.
P6. Internal Control Components
Alternative Problems
ther, she can monitor compliance with the procedures.
8-13
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1. 1. 6.
2. 7.
3. 8.
c.
c
d
c, f
a
P7. Control Activities
a, f
b, c, f
Documents and records Several new documents and records were established by
is conducted by the warehouse supervisor.
8-14
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g.
ployees' understanding of and willingness to carry out their new roles. Some exam-
Sound personnel practices This is an area of apparent weakness in the new sys-
ples: The supplies clerk must be careful to release only the amount of supplies
authorized for each job. The warehouse manager must take the physical inventory
each month and do so accurately. The purchasing clerk must make a conscious
tem. Many employees have new duties with more rigorous procedures to follow and
more forms to complete than before. The case does not specify what steps, if any,
were taken to train the employees in the new procedures and to motivate them to
accept these procedures. The success of the new system will depend on the em-
P7. Control Activities (Concluded)
8-15
© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.
