Chapter 7: Q3SE (page 412)
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?
The debit of the cash is equal to the amount deposited in the bank.
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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.
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?
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.
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 company’s employees are following company policies and meeting legal requirements and that operations are running efficiently.
c. Rearranging plain-text messages by a mathematical process—the 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 over the counter?
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