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Vilka [71]
2 years ago
8

Island Trading Co., a client of your CPA firm, has requested your advice on the following problem. It has three clerical employe

es who must perform the following functions:
1. Maintain general ledger.
2. Maintain accounts payable ledger.
3. Maintain accounts receivable ledger.
4. Maintain cash disbursements journal and prepare checks for signature.
5. Issue credit memos on sales returns and allowances.
6. Reconcile the bank account.
7. Handle and deposit cash receipts.
Assuming that there is no problem as to the ability of any of the employees, the company requests your advice on assigning the above functions to the three employees in such a manner as to achieve the highest degree of internal control. It may be assumed that these employees will perform no other accounting functions than the ones listed and that any accounting functions not listed will be performed by persons other than these three employees.

a. List four possible unsatisfactory combinations of the above-listed functions.

b. State how you would recommend distributing the above functions among the three employees. Assume that, with the exception of the nominal jobs of the bank reconciliation and the issuance of credits on returns and allowances, all functions require an equal amount of time.
Business
1 answer:
Illusion [34]2 years ago
8 0

Answer:

Explanation:

A.

General ledger - cash receipts. With custody to cash, this person could steal cash receipts and conceal the theft by recording a fictitious entry in the General Ledger to credit (reduce) the balance of the cash account by the amount stolen.2.Accounts receivable ledger - cash receipts. With custody to cash, this person could steal cash receipts and conceal the theft by recording a fictitious entry in the Accounts Receivable Subsidiary Ledger to reduce a customer's accountsreceivable balance by the amount stolen.3.Bank reconciliation - cash receipts.With custodyto cash, this person couldsteal cash receipts and conceal the theft by falsifying (recording) the bankreconciliation.4.Credits on returns and allowances - cash receipts.This person couldauthorize (authorization) or record false credit memos (recording)to customerswho are making a payment and steal the customer payments (custody)

B.

Any distribution that avoids all of the above unsatisfactory combinations and spreads the workload evenly is acceptable. The key is not to have anyone with both custody and a recording function that could be used to conceal a theft. One such combination is: First employee accounts payable ledger, accounts receivable ledger, bank reconciliations Second employee general ledger, disbursements journal, credits on returns and allowances Third employee prepare checks for signature, cash receipts

1st employee - G/L, reconcile, sales return and allowance (control)

2nd employee: Cash receipts journal, cash disbursement (assets)

3rd employee - A/R and A/p ledger (books)

Which of the following would be least likely to be considered an objective of internal control?

(1) Checking the accuracy and reliability of accounting data.

(2) Detecting management fraud.

(3) Encouraging adherence to managerial policies. (4) Safeguarding assets.

2 - Detecting management fraud.

The number of personnel in an information systems department may limit the extent to which segregation of duties is feasible. What is the minimum amount of segregation of duties that will permit satisfactory internal control?

There needs to be a minimum of 3 personnel in an information systems department to feasibly segregate duties.

Programming, operating, techical services

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Gabuat Corporation, which has only one product, has provided the following data concerning its most recent month of operations
DochEvi [55]

Answer:

c) $ 24,200

Explanation:

Computation of Total Period costs

Fixed selling and Administrative expenses                       $  8,800

Variable Selling and Administrative costs

$ 7 per unit * 2,200 units sold                                            <u>$ 15,400</u>

Total period costs                                                                $ 24,200    

The fixed manufacturing overhead is part of manufacturing costs so not considered.

The variable selling and administrative costs are based on units sold and not units produced.

5 0
3 years ago
What should I do for my biology experiment?
nadya68 [22]

CULTIVATE THE BACTERIA THAT GROW ON YOUR HAND

Ingredients: small airtight container, gelatin dessert

If you buy gelatin from a package, follow the instructions to make it. If you do not find gelatin to make, it should be even easier and just touch the gelatin from the glass jar and wait to see what happens.

Heat water on the stove and add the package contents to it, stirring the mixture vigorously until the gelatin grains dissolve. While the solution is still hot, pour into container where you want to cultivate your bacteria, and put the lid on in order to avoid contamination. Store the container in the fridge overnight so the gelatin can solidify. Remove from fridge once solid, touch the gelatin, put the lid on again and leave the container at room temp or near the radiator for a few days.

After some days you will see some white spots on the gelatin. These are your hands’ skin bacteria. Even if you try to wash your hands and repeat the experiment again, we will always have bacteria on our hands.

Explanation

Microorganisms are everywhere but we do not normally see them since they are so tiny and dispersed. In this case, they use the gelatin as food, and since there are so many nutrients in it they can divide (reproduce) many times and accumulate in the container until we are actually able to see them


3 0
3 years ago
Hemple Co. maintains escrow accounts for various mortgage companies. Hemple collects the receipts and pays the bills on behalf o
Yanka [14]

Answer:

B.

Explanation:

3 0
3 years ago
Lasting Summer Inc. has $2,510 in the October 1 balance of the accounts receivable account consisting of $1,060 from Champion Co
Feliz [49]

Answer:

Explanation:

REVENUE JOURNAL

DATE. DES. NO. DR. CR

3 Oct. Palace 622. $2,890

8 Oct Sunny. 623. $1,940

18 Oct Amex. 624. $2,970

28 Oct Wayfarer 625. $900

30 Oct. Rogers. . $120

Total revenue. $8,820

Less pmt in the month $3,010

Amount receivable. $5,810

Account receivable

Date. Description. Dr. Cr

1 Oct. Bal b/f. $2,510

3 Oct. Palace $2,890

5 Oct. Champion. $1,060

8 Oct Sunny. $1,940

12 Oct. Wayfare. $1,450

18 Oct Amex. $2,970

23 Oct. Palace. $2,890

28 Oct Wayfarer $900

Balance c/d. $5,810

7 0
3 years ago
Which of the following statements is correct?a. A decrease in the size of a tax always decreases the tax revenue raised by that
levacccp [35]

Answer:

A decrease in the size of a tax always decreases the deadweight loss of that tax.

Explanation:

Deadweight loss of tax is defined as the harm that is caused by tax to economic efficiency and prodction. It measures by how much taxes reduces the standard of living of a population.

Deadweight loss is the difference between to tax imposed and the reduction in production level it causes.

A decrease in the size of tax will give more income free to invest in production, therefore the production level will increase. This reduces the deadweight loss.

Effect of tax on deadweight is illustrated in the attached.

4 0
3 years ago
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