Chapter 7: Q12RQ (page 411)
When are the only times the Petty Cash account is used in a journal entry?
Short Answer
The petty cash account used the transaction of the petty cash fund made.
Chapter 7: Q12RQ (page 411)
When are the only times the Petty Cash account is used in a journal entry?
The petty cash account used the transaction of the petty cash fund made.
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Get started for freeUnderstanding the Sarbanes-Oxley Act and identifying internal control strengths and weaknesses. The following situations suggest a strength or a weakness in internal control.
a. Top managers delegate all internal control procedures to the accounting department.
b. Accounting department staff (or the bookkeeper) orders merchandise and approves invoices for payment.
c. Cash received over the counter is controlled by the sales clerk, who rings up the sale and places the cash in the register. The sales clerk matches the total recorded by the register to each dayโs cash sales.
d. The employee who signs checks need not examine the payment packet because he is confident the amounts are correct.
Requirements
1. Define internalcontrol.
2. The system of internal control must be tested by external auditors. What law or rule requires this testing?
3. Identify each item in the list above as either a strength or a weakness in internal control, and give your reason for each answer.
Evaluating internal control over cash receipts Dogtopia sells pet supplies and food and handles all sales with a cash register. The cash register displays the amount of the sale. It also shows the cash received and any change returned to the customer. The register also produces a customer receipt butkeeps no internal record of the transactions. At the end of the day, the clerk counts the cash in the register and gives it to the cashier for deposit in the company bank account.
Requirements
1. Identify the internal control weakness over cash receipts.
2. What could you do to correct the weakness?
Identifying internal control weakness in cash receipts
Pendley Productions makes all sales on credit. Cash receipts arrive by mail. Larry
Chipello, the mailroom clerk, opens envelopes and separates the checks from the
accompanying remittance advices. Chipello forwards the checks to another employee,
who makes the daily bank deposit but has no access to the accounting records.
Chipello sends the remittance advices, which show cash received, to the accounting
department for entry in the accounts. Chipelloโs only other duty is to grant sales
allowances to customers. (A sales allowancedecreases the customerโs account receivable.)
When Chipello receives a customer check for \(575 less a \)45 allowance, he records the
sales allowance and forwards the document to the accounting department.
Requirements
1. Identify the internal control weakness in this situation.
2. Who should record sales allowances?
3. What is the amount that should be shown in the ledger for cash receipts?
Match the accounting terminology to the definitions.
1. Sarbanes-Oxley Act
2. Internal control
3. Encryption
4. Separation of duties
5. Internal auditors
a. Organizational plan and all the related measures adopted by an entity to safeguard assets,
encourage employees to follow company policies, promote operational efficiency, and ensure
accurate and reliable accounting records.
b. Employees of the business who ensure that the companyโs employees are following company
policies and meeting legal requirements and that operations are running efficiently.
c. Rearranging plain-text messages by a mathematical processโthe primary method of
achieving security in e-commerce.
d. Requires companies to review internal control and take responsibility for the accuracy and
completeness of their financial reports.
e. Dividing responsibilities between two or more people.
How do businesses control cash receipts by mail?
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