EXERCISE 7-3 Some of the following practices are suggestive of strength in internal controls others are suggestive of weakness. Identify each of the eight practices with the term Strength or Weahneas. Give reasons for your answers. a Vouchers and all supporting documents are stamped "PAID" before being sent to the finance department for review and signing of checks. b Personnel in the accounting department are not authorized to handle cash re- ceipts. Therefore, accounts receivable records are maintained by the credit manager, who handles all collections from customers. Internal Con- trol: Identifying Strength and Weakness c Accounting department personnel are not authorized to prepare bank reconcili- ations. This procedure is performed in the finance department and the account- ing department is notified of any required adjustments to the accounts. d Checks received through the mail are recorded daily by the person maintaining accounts receivable records. e All cash receipts are deposited daily. 1. Any difference between a day's over-the-counter cash receipts and the days total shown by the cash register is added to or removed from petty cash. g After the monthly bank reconciliati tween the adjusted balance per the depositor's records and the adjusted balance per the bank statement is entered in the Cash Over and Short account. h Employees who handle cash receipts are not authorized to issue credit memo randa or to write off accounts receivable as uncollectible. has been prepared, any difference be-
EXERCISE 7-3 Some of the following practices are suggestive of strength in internal controls others are suggestive of weakness. Identify each of the eight practices with the term Strength or Weahneas. Give reasons for your answers. a Vouchers and all supporting documents are stamped "PAID" before being sent to the finance department for review and signing of checks. b Personnel in the accounting department are not authorized to handle cash re- ceipts. Therefore, accounts receivable records are maintained by the credit manager, who handles all collections from customers. Internal Con- trol: Identifying Strength and Weakness c Accounting department personnel are not authorized to prepare bank reconcili- ations. This procedure is performed in the finance department and the account- ing department is notified of any required adjustments to the accounts. d Checks received through the mail are recorded daily by the person maintaining accounts receivable records. e All cash receipts are deposited daily. 1. Any difference between a day's over-the-counter cash receipts and the days total shown by the cash register is added to or removed from petty cash. g After the monthly bank reconciliati tween the adjusted balance per the depositor's records and the adjusted balance per the bank statement is entered in the Cash Over and Short account. h Employees who handle cash receipts are not authorized to issue credit memo randa or to write off accounts receivable as uncollectible. has been prepared, any difference be-
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Transcribed Image Text:EXERCISE 7-3
Some of the following practices are suggestive of strerngth in internal controls
others are suggestive of weakness. Identify cach of the eight practices with the
term Strength or Weakness. Give reasons for your answers.
Internal Con-
trol: Identifying
, Strength and
Weakness
a Vouchers and all supporting documents are stamped “PAID" before being sent
to the finance department for review and signing of checks.
b Personnel in the accounting department are not authorized to handle cash re-
ceipts, Therefore, accounts receivable records are maintained by the credit.
manager, who handles all collections from customers.
c Accounting department personnel are not authorized to prepare bank reconcili-
ations. This procedure is performed in the finance department and the account
ing department is notified of any required adjustments to the accounts.
d Checks received through the mail are recorded daily by the person maintaining
accounts reccivable records.
e All cash receipts are deporited daily.
f. Any difference between a day's over-the-counter cash receipts and the days
total shown by the cash register is added to or removed from petty cash.
g After the monthly bank reconciliation has been prepared, any difference be
tween the adjusted balance per the depositor's records and the adjusted balance
per the bank statement is entered in the Cash Over and Short account.
h Employees who handle cash receipts are not authorized to issue credit memo
randa or to write off accounts receivable as uncollectible.
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