ch06 - CHAPTER 6 ACCOUNTING SYSTEMS, INTERNAL CONTROLS AND...

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CHAPTER 6 ACCOUNTING SYSTEMS, INTERNAL CONTROLS AND CASH CLASS DISCUSSION QUESTIONS 1. The knowledge that job rotation is practiced and that one employee may perform an- other’s job at a later date tends to discour- age deviations from prescribed procedures. Also, rotation helps to disclose any irregular- ities that may occur. 2. To reduce the possibility of errors and em- bezzlement, the functions of operations and accounting should be separated. Thus, one employee should not be responsible for handling cash receipts (operations) and maintaining the accounts receivable records (accounting). 3. The control procedure requiring that re- sponsibility for a sequence of related opera- tions be divided among different persons is violated in this situation. This weakness in the internal control may permit irregularities. For example, the ticket seller, while acting as ticket taker, could admit friends without a ticket. 4. Many transactions affect cash, and it is the asset most susceptible to improper diversion and use because of its high value in relation to its mass and its ease of transfer among parties. For these reasons, the control of cash often warrants special attention. 5. a. Cash Short and Over b. Cash shortages are debited to this ac- count. 6. The three documents supporting the liability are vendor’s invoice, purchase order, and receiving report. The invoice should be com- pared with the receiving report to determine that the items billed have been received and with the purchase order to verify quantities, prices, and terms. 7. The prenumbering of checks and the paying of all obligations by check are desirable elements of internal control. The fundament- al weakness in internal control is the failure to separate the responsibility for the maintenance of the accounting records (bookkeeping) from the responsibility for op- erations (payment of obligations). 8. a. In the unpaid voucher file, the vouchers should be filed by the due dates so that each voucher can be paid when due. b. In the paid voucher file, the vouchers should be filed in numerical order so that they can be easily located when needed. 9. The Cash balance and the bank statement balance are likely to differ because of (1) a delay by bank or depositor in recording transactions (such as checks or deposits) or (2) errors by bank or depositor in recording transactions. 10. The purpose of a bank reconciliation is to determine the reasons for the difference between the balance according to the de- positor’s records and the balance according to the bank statement, and to correct those items representing errors in recording that may have been made by the bank or by the depositor. 11. Additions made by the bank to the deposit- or’s balance 12. Accounts Receivable should be debited and Cash should be credited. 13.
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ch06 - CHAPTER 6 ACCOUNTING SYSTEMS, INTERNAL CONTROLS AND...

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