Week 8 Preparation Questions Solutions

Week 8 Preparation Questions Solutions - ACCT1501 2011S1...

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ACCT1501 2011S1 Week 8 Preparation Questions Solutions Preparation Questions: Discussion Question 7.2, 7.6, 7.8, 7.9, 7.11; Problem 7.5, 7.11; Additional Question 3 2. The main components of internal control are: i Run the enterprise competently ii Establish clear lines of responsibility iii Maintain effective records iv Separate record-keeping from handling assets v Adequately pay and motivate employees vi Carry insurance on assets vii Physically protect sensitive assets. 6. Internal controls over cash i Payments should only be made for properly authorised documentation. ii Cheques should be signed by two staff members who are independent of invoice approval and accounting duties. iii Original invoices should be stamped ‘paid’ to ensure they are not subsequently represented for payment. iv Mail openers should not also have duties related to the cashiers or record-keeping. 8. The purpose of the bank reconciliation statement is to explain any differences between the bank balance at the end of the period as shown in the bank statement and in the firm’s ledger, respectively. Any errors discovered may be rectified before completing the journals and postings for the period. 9. If a company is owed $100,000 by the bank it would appear as a DR in the company’s ledger accounts because it is an asset of the company and assets are recorded as debits. From the bank’s point of view the amount is a liability that is recorded as a credit (CR). 11. A petty cash system acts as an internal control by the maintenance of the original fund advanced to the petty cashier at its initial amount. The exact amount of disbursements made from the fund is reimbursed periodically by drawing a cheque for the required amount. The amount of the original fund is debited to an asset account, Petty Cash. Amounts subsequently reimbursed are debited to the appropriate expense accounts. The petty cashier is at all times accountable for the full amount. Requests for reimbursement are supported by appropriate vouchers and a balanced petty cash record. These are checked by a responsible person prior to reimbursement. Problem 7.5
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This note was uploaded on 03/19/2012 for the course ACCT 1501 taught by Professor Helen during the Three '09 term at University of New South Wales.

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Week 8 Preparation Questions Solutions - ACCT1501 2011S1...

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