Log out Go to App
Go to App

Learning Materials

Features

Discover

Chapter 7: Q14E (page 415)

Evaluating internal control over cash receipts Dogtopia sells pet supplies and food and handles all sales with a cash register. The cash register displays the amount of the sale. It also shows the cash received and any change returned to the customer. The register also produces a customer receipt butkeeps no internal record of the transactions. At the end of the day, the clerk counts the cash in the register and gives it to the cashier for deposit in the company bank account.

Requirements

1. Identify the internal control weakness over cash receipts.

2. What could you do to correct the weakness?

Short Answer

Expert verified

Counting cash at the end of the day and comparing it to the cash register.

Step by step solution

01

Step-by-Step SolutionStep 1: Definition of internal control over cash receipts

This method is used to control the cash receipts of the company.

02

 Internal control weakness

In this, the internal control weakness is that the cash register record does not keep the internal record of the sale. The clerk counts the cash at the end of the day. Hence, this is the internal control weakness over cash receipts.

03

 Way to correct the weakness

The weakness can be corrected by counting cash at the end of the day and comparing it with the cash register tape. Also, the internal record of the sale should be kept in the cash register.

Unlock Step-by-Step Solutions & Ace Your Exams!

  • Full Textbook Solutions

    Get detailed explanations and key concepts

  • Unlimited Al creation

    Al flashcards, explanations, exams and more...

  • Ads-free access

    To over 500 millions flashcards

  • Money-back guarantee

    We refund you if you fail your exam.

Start your free trial

Over 30 million students worldwide already upgrade their learning with Vaia!

One App. One Place for Learning.

All the tools & learning materials you need for study success - in one app.

Get started for free

Most popular questions from this chapter

Question: What is the difference between an internal auditor and an external auditor?

Accounting for petty cash Jackie’s Dance Studio created a \(220 imprest petty cash fund. During the month, the fund custodian authorized and signed petty cash tickets as follows: Petty Cash Ticket No. Item Account Debited Amount

1 Delivery of programs to customers Delivery Expense \) 20 2 Mail package Postage Expense 10 3 Newsletter Printing Expense 25 4 Key to closet Miscellaneous Expense 40 5 Copier paper Office Supplies 70

Requirements

1. Make the general journal entry to create the petty cash fund. Include an explanation.

2. Make the general journal entry to record the petty cash fund replenishment. Cash in the fund totals \(40. Include an explanation.

3. Assume that Jackie’s Dance Studio decides to decrease the petty cash fund to \)120. Make the general journal entry to record this decrease.

Evaluating internal control over cash payments Gary’s Great Cars purchases high-performance auto parts from a Nebraska vendor. Dave Simon, the accountant for Gary’s, verifies receipt of merchandise and then prepares, signs, and mails the check to the vendor.

Requirements

1. Identify the internal control weakness over cash payments.

2. What could the business do to correct the weakness?

Match the accounting terminology to the definitions.

1. Sarbanes-Oxley Act

2. Internal control

3. Encryption

4. Separation of duties

5. Internal auditors

a. Organizational plan and all the related measures adopted by an entity to safeguard assets,

encourage employees to follow company policies, promote operational efficiency, and ensure

accurate and reliable accounting records.

b. Employees of the business who ensure that the company’s employees are following company

policies and meeting legal requirements and that operations are running efficiently.

c. Rearranging plain-text messages by a mathematical process—the primary method of

achieving security in e-commerce.

d. Requires companies to review internal control and take responsibility for the accuracy and

completeness of their financial reports.

e. Dividing responsibilities between two or more people.

Journalizing credit card sales 2018

Sep. 1 Recorded National Express credit card sales for \(96,000, net of processor fee of 1%. Ignore Cost of Goods Sold.

15 Recorded ValueMax credit card sales of \)80,000. Processor charges a 1.5% fee. ValueMax charges the fee at the end of the month, therefore Marathon uses the gross method for these credit card sales. Ignore Cost of Goods Sold.

30 ValueMax collected the fees for the month of September. Assume the

September 15 transaction is the only ValueMax credit card sale. Journalize all entries required for Marathon Running Shoes.
See all solutions

Recommended explanations on Business Studies Textbooks

Introduction to Business

Read Explanation

Operational Management

Read Explanation

Financial Performance

Read Explanation

Organizational Communication

Read Explanation

Managerial Economics

Read Explanation

Strategic Analysis

Read Explanation
View all explanations

What do you think about this solution?

We value your feedback to improve our textbook solutions.

Study anywhere. Anytime. Across all devices.

Sign-up for free