Q1. The following control procedures are used at Feliz Company for over-the-counter cash receipts.
1. All over-the-counter receipts are registered by four clerks who use a cash register with a single cash drawer (till).
2. To minimize the risk of robbery, cash in excess of $200 is stored in an unlocked drawer in a desk in the back room.
3. Each clerk counts his/her own receipts at the end of the day and reconciles that amount to the cash register total.
4. A bookkeeper prepares a journal entry to record the day's cash receipts, then deposits the receipts in the bank.
5. To save funds, cashiers do not get vacation days.
Instructions
(a) For each procedure, explain the weakness in internal control, and identify the control principle that is violated.
(b) For each weakness, suggest a change in procedure that will result in good internal control.
Q2. The following control procedures are used in Wendys Antiques for cash disbursements.
1. The store manager approves all payments before she signs and issues checks.
2. The bookkeeper reconciles the bank statement and reports any discrepancies to the owner.
3. Wendy drops off new antiques on the loading dock. They are processed throughout the week and brought in to the store.
4. The company checks are unnumbered.
5. To save money, cashiers are not bonded.
Instructions
(a) For each procedure, explain the weakness in internal control, and identify the internal control principle that is violated.
(b) For each weakness, suggest a change in the procedure that will result in good internal control.
Q3. Jim Parkus is unable to reconcile the bank balance at January 31. Jim's reconciliation is shown here.
Cash balance per bank $3,660.20
Add: NSF check 570.00
Less: Bank service charge 25.00
Adjusted balance per bank $4,205.20
Cash balance per books $3,975.20
Less: Deposits in transit 590.00
Add: Outstanding checks 870.00
Adjusted balance per books $4,255.20
Instructions
(a) What is the proper adjusted cash balance per bank?
(b) What is the proper adjusted cash balance per books?