Evaluating internal control over cash receipts: Cash receipts are those payments that customer receives from the sales made. Lock-box system is used by many companies to receive customer payments. In this system, customer sends the cash receipts to the post office boxes that are maintained by the banks. Process of maintaining cash receipts by mail helps the company to have strict internal control. The following are the steps one has to follow when receiving the checks made for the payment sent by mail: Open the incoming mail. Next, send the mail to the treasurer and thus, it is deposited in the bank by the cashier. When there is a receipt of check, cashier gets a deposit receipt. Then, accounting department records all the journal entries. Then, company’s controller compares deposited amount in the bank and cash debited from the accounting department. Thus, these both amounts need to be tallied. To identify: Internal control weakness over cash receipts

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Chapter 7, Problem 7.14E

Requirement 1:

To determine

Evaluating internal control over cash receipts: Cash receipts are those payments that customer receives from the sales made. Lock-box system is used by many companies to receive customer payments. In this system, customer sends the cash receipts to the post office boxes that are maintained by the banks. Process of maintaining cash receipts by mail helps the company to have strict internal control.

The following are the steps one has to follow when receiving the checks made for the payment sent by mail:

Open the incoming mail. Next, send the mail to the treasurer and thus, it is deposited in the bank by the cashier.

When there is a receipt of check, cashier gets a deposit receipt. Then, accounting department records all the journal entries.

Then, company’s controller compares deposited amount in the bank and cash debited from the accounting department. Thus, these both amounts need to be tallied.

To identify: Internal control weakness over cash receipts

Requirement 2:

To determine

Preventive Measures

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