Obj. 2, 3 EX 7-11 Internal control of cash receipts The mailroom employees send
ID: 2563616 • Letter: O
Question
Obj. 2, 3 EX 7-11 Internal control of cash receipts The mailroom employees send all remittances and remittance advices to the cashier. The cashier deposits the cash in the bank and forwards the remittance advices and duplicate deposit slips to the Accounting Department. A. B. How can the weakness be corrected? Indicate the weak link in internal control in the handling of cash receipts. Obj. 3 2 Entry for cash sales; cash short The actual cash received from cash sales was $61,355, and the amount indicated by the cash register total was $61,380. Journalize the entry to record the cash receipts and cash sales.Explanation / Answer
Part 1 Analysis of the situation
Present Flow of Information = Mailroom employees ----- Cashier ----- Accounting department
Particulars
Advice
1) Weak link in internal control in handling cash receipts
Weak link is that all remittances and remittances advices are directly sent to cashier by mailroom department. Breaching the main component of Interal control system. Cashier can easily manipulate the things before sending the advices to accounting department.
2) How can the weakness be corrected
Such weaknesses can be corrected and such control risk can be reduced to low level by sending all the remitances and remittances advices directly to accounting department. Through this Transparency will increase.
Required flow of Inflormation = Mailroom employee ---- accounting department
Part 2 Journal Entry
Particular
Dr Amount
Cr Amount
Cash a/c DR
$61355
Cash short and over a/c Dr.
$25
Sales a/c Cr.
$61380
The term cash short and over is an expense account whose purpose is to report overages and shortages to an imprest account. This account is used to record the difference between the expected cash balance and the actual cash balance in the imprest account.
Particulars
Advice
1) Weak link in internal control in handling cash receipts
Weak link is that all remittances and remittances advices are directly sent to cashier by mailroom department. Breaching the main component of Interal control system. Cashier can easily manipulate the things before sending the advices to accounting department.
2) How can the weakness be corrected
Such weaknesses can be corrected and such control risk can be reduced to low level by sending all the remitances and remittances advices directly to accounting department. Through this Transparency will increase.
Required flow of Inflormation = Mailroom employee ---- accounting department
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