Chapter 7: Q7RQ (page 411)
What are some limitations of internal controls?
Short Answer
There are four limitations of the internal controls.
Chapter 7: Q7RQ (page 411)
What are some limitations of internal controls?
There are four limitations of the internal controls.
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Get started for freeJournalizing petty cash
Prepare the journal entries for the following petty cash transactions of Everly Gaming
Supplies:
March 1 Established a petty cash fund with a \(250 balance.
31 The petty cash fund has \)24 in cash and \(235 in petty cash tickets
that were issued to pay for Office Supplies (\)35) and Entertainment
Expense (\(200). Replenished the fund and recorded the expenditures.
April 15 Increased the balance of the petty cash fund to \)300.
Identifying internal controls. Consider each situation separately. Identify the missing internal control procedure from these characteristics:
โข Assignment of responsibilities
โข Separation of duties
โข Audits
โข Electronic devices
โข Other controls (specify)
a. While reviewing the records of Quality Pharmacy, you find that the same Team member orders merchandise and approves invoices for payment.
b. Business is slow at Amazing Amusement Park on Tuesday, Wednesday, and Thursday nights. To reduce expenses, the business decides not to use a ticket taker on those nights. The ticket seller (cashier) is told to keep the tickets as a record of the number sold.
c. The same trusted team member has served as a cashier for 12 years.
d. When business is brisk, Fast Mart deposits cash in the bank several times during the day. The manager at one store wants to reduce the time employees spend delivering cash to the bank, so he starts a new policy. Cash will build up over weekends, and the total will be deposited on Monday.
e. Grocery stores such as Convenience Market and Natural Foods purchase most merchandise from a few suppliers. At another grocery store, the manager decides to reduce paperwork. He eliminates the requirement that the receiving department prepare a receiving report listing the goods actually received from
the supplier.
What is internal control?
What are two common methods used when accepting deposits for credit card and debit card transactions?
Levon Helm was a kind of one-person mortgage broker. He would drive around Tennessee looking for homes that had second mortgages, and if the criteria were favorable, he would offer to buy the second mortgage for โcash on the barrelhead.โ Helm bought low and sold high, making sizable profits. Being a small operation, he employed one person, Cindy Patterson, who did all his bookkeeping. Patterson was an old family friend, and he trusted her so implicitly that he never checked up on the ledgers or the bank reconciliations. At some point, Patterson started โborrowingโ from the business and concealing her transactions by booking phony expenses. She intended to pay it back someday, but she got used to the extra cash and couldnโt stop. By the time the scam was discovered, she had drained the company of funds that it owed to many of its creditors. The company went bankrupt, Patterson did some jail time, and Helm lost everything
Requirements
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