Ramona’s Clothing is a retail store specializing in women’s clothing. The store has established a liberal return policy for the holiday season in order to encourage gift purchases. Any item purchased during November and December may be returned through January 31, with a receipt, for cash or exchange. If the customer does not have a receipt, cash will still be refunded for any item under $75. If the item is more than $75, a check is mailed to the customer.Whenever an item is returned, a store clerk completes a return slip, which the customer signs. The return slip is placed in a special box. The store manager visits the return counter approximately once every two hours to authorize the return slips. Clerks are instructed to place the returned merchandise on the proper rack on the selling floor as soon as possible.This year, returns at Ramona’s Clothing have reached an all-time high. There are a large number of returns under $75 without receipts.a. How can salesclerks employed at Ramona’s Clothing use the store’s return policy to steal money from the cash register?b. What internal control weaknesses do you see in the return policy that make cash thefts easier?c. Would issuing a store credit in place of a cash refund for all merchandisereturned without a receipt reduce the possibility of theft? List some advantages and disadvantages of issuing a store credit in place of a cash refund.d. Assume that Ramona’s Clothing is committed to the current policy of issuing cash refunds without a receipt. What changes could be made in the store’s procedures regarding customer refunds to improve internal control?
The Effect Of Prepaid Taxes On Assets And Liabilities
Many businesses estimate tax liability and make payments throughout the year (often quarterly). When a company overestimates its tax liability, this results in the business paying a prepaid tax. Prepaid taxes will be reversed within one year but can result in prepaid assets and liabilities.
Final Accounts
Financial accounting is one of the branches of accounting in which the transactions arising in the business over a particular period are recorded.
Ledger Posting
A ledger is an account that provides information on all the transactions that have taken place during a particular period. It is also known as General Ledger. For example, your bank account statement is a general ledger that gives information about the amount paid/debited or received/ credited from your bank account over some time.
Trial Balance and Final Accounts
In accounting we start with recording transaction with journal entries then we make separate ledger account for each type of transaction. It is very necessary to check and verify that the transaction transferred to ledgers from the journal are accurately recorded or not. Trial balance helps in this. Trial balance helps to check the accuracy of posting the ledger accounts. It helps the accountant to assist in preparing final accounts. It also helps the accountant to check whether all the debits and credits of items are recorded and posted accurately. Like in a balance sheet debit and credit side should be equal, similarly in trial balance debit balance and credit balance should tally.
Adjustment Entries
At the end of every accounting period Adjustment Entries are made in order to adjust the accounts precisely replicate the expenses and revenue of the current period. It is also known as end of period adjustment. It can also be referred as financial reporting that corrects the errors made previously in the accounting period. The basic characteristics of every adjustment entry is that it affects at least one real account and one nominal account.
Ramona’s Clothing is a retail store specializing in women’s clothing. The store has established a liberal return policy for the holiday season in order to encourage gift purchases. Any item purchased during November and December may be returned through January 31, with a receipt, for cash or exchange. If the customer does not have a receipt, cash will still be refunded for any item under $75. If the item is more than $75, a check is mailed to the customer.
Whenever an item is returned, a store clerk completes a return slip, which the customer signs. The return slip is placed in a special box. The store manager visits the return counter approximately once every two hours to authorize the return slips. Clerks are instructed to place the returned merchandise on the proper rack on the selling floor as soon as possible.
This year, returns at Ramona’s Clothing have reached an all-time high. There are a large number of returns under $75 without receipts.
a. How can salesclerks employed at Ramona’s Clothing use the store’s return policy to steal money from the cash register?
b. What internal control weaknesses do you see in the return policy that make cash thefts easier?
c. Would issuing a store credit in place of a cash refund for all merchandise
returned without a receipt reduce the possibility of theft? List some advantages and disadvantages of issuing a store credit in place of a cash refund.
d. Assume that Ramona’s Clothing is committed to the current policy of issuing cash refunds without a receipt. What changes could be made in the store’s procedures regarding customer refunds to improve internal control?
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