The following procedures were recently installed by Raspberry Creek Company: Aft
ID: 2488256 • Letter: T
Question
The following procedures were recently installed by Raspberry Creek Company: After necessary approvals have been obtained for the payment of a voucher, the treasurer signs and mails the check. The treasurer then stamps the voucher and supporting documentation as paid and returns the voucher and supporting documentation to the accounts payable clerk for filing. The accounts payable clerk prepares a voucher for each disbursement. The voucher along with the supporting documentation is forwarded to the treasurer's office for approval. Along with petty cash expense receipts for postage, office supplies, etc., several post-dated employee checks are in the petty cash fund. At the end of the day, cash register clerks are required to use their own funds to male up any cash shortages in their registers. At the end of each day, all cash receipts are placed in the bank's night depository. At the end of each day, an accounting clerk compares the duplicate copy of the daily cash deposit slip with the deposit receipt obtained from the bank. All mail is opened by the mail clerk, who forwards all cash remittances to the cashier. The cashier prepares a listing of the cash receipts and forwards a copy of the list to the accounts receivable clerk for recording in the accounts. The bank reconciliation is prepared by the cashier, who works under the supervision of the treasurer. Indicate whether each of the procedures of internal control over cash represents a strength or a weakness. For each weakness, indicate why it exists. Cactus Restoration Company completed the following selected transaction during May 2016: Oct. 1. Established a petty cash fund of $750. 12. The cash sales for the day, according to the cash register records, totaled The actual cash received from cash sales was $12,465. 31. Petty cash on hand was $157. Replenished the petty cash fund for the following disbursements, each evidenced by a petty cash receipt:Explanation / Answer
:
(A)
This is a weakness.
Requiring cash register clerks to make up any cash shortages from their own funds gives the clerks an incentive to short change customers. That is, the clerks will want to make sure that they don’t have a shortage at the end of the day. In addition, one might also assume that the clerks can keep any overages. This would again encourage clerks to short change customers. The short changing of customers will create customer complaints, etc. The best policy is to report any cash shortages or overages at the end of each day. If there is consistently a cash short or over, then corrective action (training, removal, etc.) could be taken.
(B)
Strength:
The Disbursement Voucher (DV) document is used to make payments not related to the procurement of goods or services. For any payment against a Purchase Order (PO), please use the Payment Request document. Payment Reason Codes, Each DV document must have a specific payment reason code selected. These reason codes drive which types of payees, accounts, object codes, and sub-objects are allowed on the document. In order to select a Payment Reason Code, click on the Payee ID lookup icon on the Payment Information tab. Please refer to the Payment Reason Codes . The DV document refers to vendors as Payees, but it utilizes the same vendor table as Requisitions and Purchase Orders. If you are having trouble finding a vendor in the lookup or if you need to add or update an existing vendor,
Weakness:
1. Initiator - Save or Submit
2. Fiscal Officer - Approve/Disapprove
3. Organization Review (optional) - Approve/Disapprove
4. Accounts Payable or Tax Accounting (depending on the Payment Reason Code) - Approve/Disapproval.
(C)
This is a weakness.
The mail clerk should prepare an initial listing of cash remittances before forwarding the cash receipts to the cashier. This establishes initial accountability for the cash receipts. The mail clerk should forward a copy of the listing of remittances to the accounts receivable clerk for recording in the accounts.
(D)
This is a weakness.
Requiring cash register clerks to make up any cash shortages from their own funds gives the clerks an incentive to short change customers. That is, the clerks will want to make sure that they don’t have a shortage at the end of the day. In addition, one might also assume that the clerks can keep any overages. This would again encourage clerks to short change customers. The short changing of customers will create customer complaints, etc. The best policy is to report any cash shortages or overages at the end of each day.
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