Accounting Information Systems
11th Edition
ISBN: 9780357156032
Author: Ulric J. Gelinas; Richard B. Dull; Patrick Wheeler
Publisher: Cengage Limited
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Chapter 11, Problem 1SP
Summary Introduction
To explain: The recommendations for the process.
Introduction:
B/AR/CR process:
It is an accounting process with an interacting structure of different process supporting the decision-making activities of the
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Janice Dodds opens the mail for Ajax Plumbing Company. She lists all customer checks on a spreadsheet that includes the name of the customer and the check amount. The checks, along with the spreadsheet, are then sent to Jim Seymour in the accounting department, who records the checks and deposits them daily in the company’s checking account. Required: Describe how the company could improve its internal control procedure for the handling of its cash receipts.
The following procedures were recently implemented by SUP Yoga Co.:
Each cashier is assigned a separate cash register drawer to which no other cashier has access.
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.
At the end of a shift, each cashier counts the cash in his or her cash register, unlocks the cash register record, and compares the amount of cash with the amount on the record to determine cash shortages and overages.
Checks received through the mail are given daily to the accounts receivable clerk for recording collections on account and for depositing in the bank.
Vouchers and all supporting documents are stamped PAID after being paid by the treasurer.
Disbursements are made from the petty cash fund only after a petty cash receipt has been completed and signed by the payee.
The bank reconciliation is prepared by the accountant.
Instructions:
Indicate whether each of the…
(b) The following information describes part of the cash collection procedure at Ritaj Sdn.Bhd. It is a small company which processes its daily transactions manually. Every day, for the cash collection procedure, a clerk in the Accounts Receivable Department will review the Account Receivable (AR) subsidiary ledger for the payments that are due to be received. He then prepares a cash collection letter and sends it to the cash collection department to check the outstanding amount owed by its customers from credit sales to the firm. Upon receiving the document from the account receivable department, the cash collection clerk determines the volume of credit sales and the
average collection period. Both of these factors have direct relationship with the firm’s
credit and collection policies. Since accounts receivable is an important link in working
capital management, the establishment and implementation of these policies will have direct impact on the firm’s operation and profitability as…
Chapter 11 Solutions
Accounting Information Systems
Ch. 11 - What is the billing/accounts receivable/cash...Ch. 11 - What primary activities does the B/AR/CR process...Ch. 11 - Prob. 3RQCh. 11 - What functions are typically segregated in the...Ch. 11 - Prob. 5RQCh. 11 - Describe several ways that companies have reduced...Ch. 11 - Prob. 7RQCh. 11 - Prob. 8RQCh. 11 - Prob. 9RQCh. 11 - What is accounts receivable master data?
Ch. 11 - What are the major features of a balance-forward...Ch. 11 - What are the differences between a post-billing...Ch. 11 - Prob. 13RQCh. 11 - Prob. 14RQCh. 11 - What characterizes a valid RA (i.e., cash...Ch. 11 - Prob. 16RQCh. 11 - Prob. 17RQCh. 11 - Develop several examples of possible goal...Ch. 11 - Prob. 2DQCh. 11 - Prob. 3DQCh. 11 - Prob. 4DQCh. 11 - Prob. 5DQCh. 11 - The two most widely used billing systems are (1)...Ch. 11 - Prob. 7DQCh. 11 - Prob. 1SPCh. 11 - Prob. 2SPCh. 11 - Prob. 3SPCh. 11 - Prob. 5SPCh. 11 - Prob. 6SPCh. 11 - Prob. 3PCh. 11 - Prob. 5PCh. 11 - Prob. 6PCh. 11 - Use the DFDs in Figure 11.3 (pg. 416), Figure 11.4...
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- The vice president of finance asks the accounts payable (AP) clerk to write a check in the name of the president for $10,000. He and the president will sign the check (two signatures needed on a check of this size). He further instructs the AP clerk not to disclose this check to her immediate supervisor. What should the AP clerk do? Should she prepare the check? Should she inform her immediate supervisor? Discuss with internal controls in mind.arrow_forwardThe following information describes part of the cash collection procedure at Ritaj Sdn. Bhd. It is a small company which processes its daily transactions Every day, for the cash collection procedure, a clerk in the Accounts Receivable Department will review the Account Receivable (AR) subsidiary ledger for the payments that are due to be received. He then prepares a cash collection letter and sends it to the cash collection department to check the outstanding amount owed by its customers from credit sales to the firm. Upon receiving the document from the account receivable department, the cash collection clerk determines the volume of credit sales and the average collection period. Both of these factors have direct relationship with the firm’s credit and collection policies. Since accounts receivable is an important link in working capital management, the establishment and implementation of these policies will have direct impact on the firm’s operation and profitability as a whole.…arrow_forwardMatch each of the following cash payment activities to the internal control principle to which itbest relates. Enter the appropriate letter in the space provided.1. The business manager has the only key to thecheck-signing equipment.2. The purchasing manager orders all goods andservices for the business.3. A bank reconciliation is prepared monthly.4. Prenumbered checks are used for all payments.5. The company asks suppliers to deliver their merchandise to the warehouse but mail their invoicesto the accounting department.A. Establish responsibilityB. Segregate dutiesC. Restrict accessD. Document proceduresE. Independently verifyarrow_forward
- How would I do this? You have been hired as the new controller for Acme Business Products. You discover that there are no formal procedures in place for processing cash receipts from customers. Your staff consists of the following: you, one general ledger accountant, one accounts receivable staff, one accounts payable staff, and one administrative assistant. Compose your responses to the following in the form of a narrative: A. Develop a step-by-step process for the intake, deposit, recording, and reconciling of cash payments received from customers. Be sure to defend your rationale for each step of your process. B. Provide recommendations as to who in your office should perform which process tasks. Why are these the most appropriate assignments? a) Predict the impact that would take place if one of your staff left and another were on leave. Recommend temporary adjustments to the process that would be necessary if this took place.arrow_forwardYou are the auditor for Office Supply, which is opening a new location next week. The store manager has established all the controls you recommended for ensuring that sales are recorded properly, and cash is accounted for. The manager has heard from other locations that employees often used returned goods as a means of skimming money from the register. Choose one of the following questions to discuss: How might an employee use returned goods to skim money from the register? What controls would you recommend to prevent or detect fraudulent returns? What audit procedures might you perform to detect fraudulent returns?arrow_forwardUpon receipt of customers’ checks in the mail room, a responsible employee should prepare a remittance list that is forwarded to the cashier. A copy of the list should be sent to thea. Internal auditor to investigate the list for unusual transactions.b. Treasurer to compare the list with the monthly bank statement.c. Accounts receivable bookkeeper to update the subsidiary accounts receivable records.d. Entity’s bank to compare the list with the cashier’s deposit slip.arrow_forward
- The following procedures were recently installed by The China Shop:a. 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. Each cashier is assigned a separate cash register drawer to which no other cashier has access.c. At the end of a shift, each cashier counts the cash in his or her cash register, unlocks the cash register record, and compares the amount of cash with the amount on the record to determine cash shortages and overages.d. Checks received through the mail are given daily to the accounts receivable clerk for recording collections on account and for depositing in the bank.e. Vouchers and all supporting documents are perforated with a PAID designation after being paid by the treasurer.f. Disbursements are made from the petty cash fund only after a petty cash receipt has been completed and signed by the payee.g. The bank reconciliation is prepared by the cashier. Instructions…arrow_forwardIsland Trading Co., a client of your CPA firm, has requested your advice on the following problem. It has three clerical employees who must perform the following functions: (1) Maintain general ledger. (2) Maintain accounts payable ledger. (3) Maintain accounts receivable ledger. (4) Maintain cash disbursements journal and prepare checks for signature. (5) Issue credit memos on sales returns and allowances. (6) Reconcile the bank account. (7) Handle and deposit cash receipts. Assuming that there is no problem as to the ability of any of the employees, the company requests your advice on assigning the above functions to the three employees in such a manner as to achieve the highest degree of internal control. It may be assumed that these employees will perform no other accounting functions than the ones listed and that any accounting functions not listed will be performed by persons other than these three employees. a. List four possible unsatisfactory combinations of the…arrow_forwardDetermine whether each cash receipts procedure is an internal control strength or weakness. 1. If a salesclerk makes an error in recording a cash sale, she can access the register’s electronic record to correct the transaction. 2. All sales transactions, even those for less than $1, are recorded on a cash register. 3. Two employees are tasked with opening mail that contains cash receipts. 4. One of the two employees tasked with opening mail is also the recordkeeper for the business. 5. The supervisor has access to both cash and the accounting records. 6. Receipts are given to customers only for sales that are above $20.arrow_forward
- Upon receipt of the documents from accounts payable department, the cash disbursements clerk files the documents until their payment due date. On the due date, the clerk prepares a cheque for the invoiced amount, which is sent to the treasurer who signs it and mails back to the supplier. The cash disbursement clerk then updates the cheque register, accounts payable ledger, and accounts payable control account from the clerk’s terminal. Finally, the clerk files the invoice and copy of purchase order, receiving report, cheque in the department. Required: Describe the internal control weakness in Two Symbols’ cash disbursements system and discuss the risk associated with the weakness.arrow_forwardReview the internal controls over cash receipts by mail. Exactly what is accomplished by the final step in the process, performed by the controller? In the final step of the control process the controller compares the records of the day's cash receipts, as follows: (What would the controller look at to see the amount of cash that went into the bank, and who would provide him with the backup?) 1. amount from the (What would the controller look at to see what was recorded by the Company, and who would provide him with the data?) 2. from the This comparison ensuresarrow_forwardThe following is the description of cash disbursements system of Two Symbols Limited:Upon receipt of the documents from accounts payable department, the cash disbursements clerk files the documents until their payment due date. On the due date, the clerk prepares a cheque for the invoiced amount, which is sent to the treasurer who signs it and mails back to the supplier.The cash disbursement clerk then updates the cheque register, accounts payable ledger, and accounts payable control account from the clerk’s terminal. Finally, the clerk files the invoice and copy of purchase order, receiving report, cheque in the department.Required:Describe the internal control weakness in Two Symbols’ cash disbursements system and discuss the risk associated with the weakness.(maximum explanation) do not copy paste the words from google otherwise answer would be rejected dur to softwarearrow_forward
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