Internal Control Over Cash Transactions

Internal control over cash transactions
Listed below are seven errors or problems that might occur in the processing of cash transactions. Also shown is a separate list of internal control procedures. Indicate the internal control procedure that should prevent the error or problem from occurring. If none of the control procedures would effectively prevent the error, place an X in the space provided.
Possible Error or Problem
_____ 1. A purchase invoice was paid even though the merchandise was never received.
_____ 2. An employee issued a credit memorandum for a nonexistent sales return in order to conceal his theft of the amount received in payment of an account receivable.
_____ 3. Management is unaware that blank checks are being issued for unauthorized expenditures by the official designated to sign checks.
_____ 4. A salesclerk collects the full selling price from a customer but rings up the sale at less than actual price and pockets the difference.
_____ 5. Several days' cash receipts are lost in a fire.
_____ 6. A new employee often gives customers an incorrect amount of change.
_____ 7. No one has discovered that amounts deposited in the company's bank account by the cashier over the last few years are frequently smaller than amounts forwarded to him from the mailroom or sales department.
Internal Control Procedures

Correct Answer:

Verified

(a). Periodic reconciliation of bank sta...

View Answer

Unlock this answer now
Get Access to more Verified Answers free of charge

View Full Answer For Free