Chapter 9, Problem 1QC

1. With good internal controls, the person who handles cash can also

Learning Objective 1

1. account for cash payments.
2. account for cash receipts from customers.
3. issue credits to customers for sales returns.
4. None of the above

To determine

Internal Control: Internal controls are just approaches or methods set up to defend a benefit, give solid budgetary data, advance productive and successful operations, and guarantee strategy consistence. For instance: When you came to work toward the beginning of today did you bolt the ways to your home? Provided that this is true, that is a case of an "internal control" you used to ensure the advantages you claim.

What other work can a person handling cash can do if the organization has good internal controls.

Explanation of Solution

Solution: option d

Good internal controls mean that the organization is working efficiently and effectively by adhering to the company policies and procedures. It also ensures that proper controls are in place to ensure that no task is distributed to counter or to affect the independence and integrity of work performed by one person.

Definition of internal control contains the following parts:

a. Safeguarding of assets

b. Encourage employees to follow company policies.

c. Promote Operational efficiencies

d. Compliance with applicable laws and regulations.

Explanations:

If a person is handling cash a good internal control requires that proper separation of duties should be in place to ensure a single person should not have the total control over the entire cash process.

Given options can be analyzed as follows:

1. A person handling the cash should not account for cash payment as it is a part of an effective internal control and comes under separation of duties.
2. If the person handling the cash accounts for cash receipts then there may be chances that the cashier my enter wrong amounts in accounts making the internal control process inefficient, hence this option is also incorrect.
3. Issuing credits to customer for sales returns also is a responsibility which need to be segregated from the person handling the responsibility of cash this option is incorrect.
4. None of the above is a right choice as none of the option is correct.

Conclusion

From the above analysis, we can conclude that all the responsibilities will make the internal controls weak hence its not advisable to so any of the given task hence option d is correct.