Horngren's Financial & Managerial Accounting (5th Edition)
5th Edition
ISBN: 9780133866292
Author: Tracie L. Miller-Nobles, Brenda L. Mattison, Ella Mae Matsumura
Publisher: PEARSON
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Question
Chapter 7, Problem 7.21AP
Requirement 1:
To determine
Cash Receipts by Mail: 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: The internal control weakness
Requirement 2:
To determine
To find: Recording of sales allowance
Requirement 3:
To determine
To calculate: Total cash receipts
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Identifying internal control weakness in cash receipts
Pendley Productions makes all sales on credit. Cash receipts arrive by mail. Larry Chipcllo, the mailroom clerk, opens envelopes and separates the checks from the accompanying remittance advice. Chipello forwards the checks to another employee, who makes the daily bank deposit but has no access to the accounting records. Chipello sends the remittance advice, which shows cash received, to the accounting department for entry in the accounts. Chipello’s only other duty is to grant sales allowances to customers. (A sales allowance decreases the customer’s account receivable.) When Chipello receives a customer check for $575 less than a $45 allowance, he records the sales allowance and forwards the document to the accounting department.
Requirements
Identify the internal control weakness in this situation.
Who should record sales allowances?
What is the amount that should be shown in the ledger for cash receipts?
Identifying internal control weakness in cash receipts
Pendley Productions makes all sales on credit. Cash receipts arrive by mail. Larry Chipcllo, the mailroom clerk, opens envelopes and separates the checks from the accompanying remittance advices. Chipello forwards the checks to another employee, who makes the daily bank deposit but has no access to the accounting records. Chipello sends the remittance advices, which show cash received, to the accounting department for entry in the accounts. Chipello’s only other duty is to grant sales allowances to customers. (A sales allowance decreases the customer’s account receivable.) When Chipello receives a customer check for $575 less a $45 allowance, he records the sales allowance and forwards the document to the accounting department.
Requirements
Identify the internal control weakness in this situation.
Who should record sales allowances?
What is the amount that should be shown in the ledger for cash receipts?
Identifying internal control weakness in cash receipts
Seawind Productions makes all sales on credit. Cash receipts arrive by mail. Justin Broadway, the mailroom clerk, opens envelopes and separates the checks from the accompanying remittance advice. Broadway forwards the checks to another employee, who makes the daily bank deposit but has no access to the accounting records. Broadway sends the remittance advice, which show cash received, to the accounting department for entry in the accounts. Broadway’s only other duty is to grant sales allowances to customers. (A sales allowance decreases the customer’s account receivable.) When Broadway receives a customer check for $600 less than a $30 allowance, he records the sales allowance and forwards the document to the accounting department.
Requirements
Identify the internal control weakness in this situation.
Who should record sales allowances?
What is the amount that should be shown in the ledger for cash receipts?<
Chapter 7 Solutions
Horngren's Financial & Managerial Accounting (5th Edition)
Ch. 7 - Prob. 1QCCh. 7 - Prob. 2QCCh. 7 - Prob. 3QCCh. 7 - Prob. 4QCCh. 7 - Prob. 5QCCh. 7 - Prob. 6QCCh. 7 - Prob. 7QCCh. 7 - Prob. 8QCCh. 7 - Prob. 9QCCh. 7 - Prob. 10QC
Ch. 7 - Prob. 1RQCh. 7 - Prob. 2RQCh. 7 - What are the five components of internal control?...Ch. 7 - Prob. 4RQCh. 7 - What is separation of duties?Ch. 7 - Prob. 6RQCh. 7 - Prob. 7RQCh. 7 - Prob. 8RQCh. 7 - How do businesses control cash receipts by mail?Ch. 7 - Prob. 10RQCh. 7 - Prob. 11RQCh. 7 - Prob. 12RQCh. 7 - Prob. 13RQCh. 7 - Prob. 14RQCh. 7 - Prob. 15RQCh. 7 - Prob. 16RQCh. 7 - Prob. 17RQCh. 7 - Defining internal control Internal controls are...Ch. 7 - Prob. 7.2SECh. 7 - Prob. 7.3SECh. 7 - Prob. 7.4SECh. 7 - Prob. 7.5SECh. 7 - Prob. 7.6SECh. 7 - Prob. 7.7SECh. 7 - Prob. 7.8SECh. 7 - Prob. 7.9SECh. 7 - Prob. 7.10SECh. 7 - Prob. 7.11ECh. 7 - Prob. 7.12ECh. 7 - Prob. 7.13ECh. 7 - Evaluating internal control over cash payments...Ch. 7 - Understanding internal control, components,...Ch. 7 - Prob. 7.16ECh. 7 - Prob. 7.17ECh. 7 - Prob. 7.18ECh. 7 - Prob. 7.19ECh. 7 - Prob. 7.21APCh. 7 - Prob. 7.22APCh. 7 - Prob. 7.23APCh. 7 - Prob. 7.24APCh. 7 - Prob. 7.25APCh. 7 - Prob. 7.26APCh. 7 - Prob. 7.27BPCh. 7 - Prob. 7.28BPCh. 7 - Prob. 7.29BPCh. 7 - Prob. 7.30BPCh. 7 - Prob. 7.31BPCh. 7 - Prob. 7.32BPCh. 7 - Prob. 7.33CPCh. 7 - Prob. 7.34PSCh. 7 - Prob. 7.2CTDCCh. 7 - Levon Helm was a kind of one-man mortgage broker....Ch. 7 - Prob. 7.1CTCA
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