P5-1 Evaluate internal control of cash The following procedures were recently in
ID: 2430615 • Letter: P
Question
P5-1 Evaluate internal control of cash The following procedures were recently installed by The China Shop: All sales are rung up on the cash register, and a receipt is given to the customer. All sales are recorded on a record locked inside the cash register b. At the end of a shift, each cashier counts the cash in his or her cash register, unlocks the the record to c. Checks received through the mail are given daily to the accounts receivable clerk for cash register record, and compares the amount of cash with the amount on determine cash shortages and overages. recording collections on account and for depositing in the bank. Disbursements are made from the petty cash fund only after a petty cash receipt has been completed and signed by the payee. e. Each cashier is assigned a separate cash register drawer to which no other cashier has access. f. The bank reconciliation is prepared by the accountant. g. Vouchers and all supporting documents are perforated with a PAID designation after being paid by the treasurer Instructions Indicate whether each of the procedures of internal control over cash represents (1) a strength or (2) a weakness. For each weakness, indicate why it exists.Explanation / Answer
P5-1 Internal Control of Cash
(a) This internal control over cash represent "Strength".
(b) This internal control over cash represent "Weakness".This weakness exists because the cashier himself counts the cash in his or her register, unlocks cash register record and compares the amount of cash with the amount on the record and that may lead to situations where the cash shortages and overages are not reported by the cashier.This comparison of cash amount with cash register record should be done under the proper supervision of an authorized officer so that the cash shortages and overages are properly disclosed.
(c) This internal control over cash represent "Strength"
(d) This internal control over cash represent "Strength"
(e) This internal control over cash represent "Strength"
(f) This internal control over cash represent "Strength"
(g) This internal control over cash represent "Strength"
P5-2 BANK RECONCILATION STATEMENT
Balance as per bank statement as on March 31, 20Y6 = $ 27,150
(a) Less: Checks Outstanding = $ 9,675
(b) Add: Receipts of 31 March too late to appear
on the bank statement = $ 4,175
(c) Less: Amount of note left for collection = $ 8,480
(d) Less: Check returned (810-180) = $ 630
(e) Less: Check drawn which is less charges by bank
(750-570) = $ 180
(f) Add: Bank Charges for March = $ 75
Balance as per cash account in books as on
March31, 20Y6 (Reconcilied with bank balance) = $ 12,435
(2) Effect of bank reconcilation on Accounts and Financial Statements :-
The ,main reason for preparing bank reconcilation is to find out the differences between the bank balance and balance as per books.This is prepared to check whether the cash is appropriately recorded in the books of accounts or not.This statement is also used to detects frauds.It is a useful internal financial control.
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