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Evaluating internal control over cash payments Gary’s Great Cars purchases high-performance auto parts from a Nebraska vendor. Dave Simon, the accountant for Gary’s, verifies receipt of merchandise and then prepares, signs, and mails the check to the vendor.

Requirements

1. Identify the internal control weakness over cash payments.

2. What could the business do to correct the weakness?

Short Answer

Expert verified

There is a weakness in the assignment of responsibilities.

Step by step solution

01

Step-by-Step Solution Step 1: Definition of internal control over cash payments

Internal control over cash payments means controlling the activities of cash payments.

02

Internal control weakness

The weakness of internal control is that one person is performing all responsibilities. Hence, the main weakness is the assignment of responsibilities.

03

Way to correct the weakness

This weakness is correct by assigning different responsibilities to different persons.

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Most popular questions from this chapter

Applying internal control over cash receipts by mail. Review the internal controls over cash receipts by mail presented in the chapter. Exactly what is accomplished by the final step in the process, performed by the controller?

What is internal control?

Applying internal control over cash payments by check

A purchasing agent for Franklin Office Supplies receives the goods that he purchases

and also approves payment for the goods.

Requirements

1. How could this purchasing agent cheat his company?

2. How could Franklin avoid this internal control weakness?

Preparing a bank reconciliation

Jim Root Corporation operates four bowling alleys. The business just received the

On October 31, 2018, bank statement from City National Bank, and the statement shows

an ending balance of \(910. Listed on the statement are an EFT rent collection of

\)440, a service charge of \(7, NSF checks totaling \)50, and a \(23 charge for printed

checks. In reviewing the cash records, the business identified outstanding checks totaling

\)440 and a deposit in transit of \(1,800. During October, the business recorded a

\)260 check by debiting Salaries Expense and crediting Cash for \(26. The business’s

Cash account shows an October 31 balance of \)2,144.

Requirements

1. Prepare the bank reconciliation at October 31.

2. Journalize any transactions required from the bank reconciliation.

In 100 words or fewer, explain why there may be a difference between the bank statement ending cash balance and the ending balance in the Cash account. Give at least two examples of adjustments to the bank balance and the book balance.

See all solutions

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