An internal control system consists of all policies and procedures used to protect assets, ensure reliable accounting, promote efficient operations, and urge adherence to company policies. Evaluate each of the following statements and indicate which are true and which are false regarding the objectives of an internal control system.
2. The primary objective of internal control procedures is to safeguard the business against theft from government agencies.
The mentioned statement is False.
Government agencies: Government agencies are established by legislative, special government organizations set up for a particular reason, such as national security issues, to manage industries' resources or financial oversight.
Internal control focuses on inclining further toward the internal activity of an association as opposed to the external. Although it can, in any case, be of effect in checking the excesses of outside parties like the public authority offices, that isn't its primary objective.
The following information is available to reconcile Severino Co.’s book balance of cash with its bank statement cash balance as of December 31, 2017.
a. The December 31 cash balance according to the accounting records is $32,878.30, and the bank statement cash balance for that date is $46,822.40.
b. Check No. 1273 for $4,589.30 and Check No. 1282 for $400, both written and entered in the accounting records in December, are not among the canceled checks. Two checks, No. 1231 for $2,289 and
No. 1242 for $410.40, were outstanding on the most recent November 30 reconciliation. Check No. 1231 is listed with the December canceled checks, but Check No. 1242 is not.
c. When the December checks are compared with entries in the accounting records, it is found that Check No. 1267 had been correctly drawn for $3,456 to pay for office supplies but was erroneously entered in the accounting records as $3,465.
d. Two memoranda are enclosed with the statement and are unrecorded at the time of the reconciliation. The first is for a $762.50 charge that dealt with an NSF check for $745 received from a customer, Titus Industries, in payment of its account. The bank assessed a $17.50 fee for processing it. The second is $99 in miscellaneous expenses for check printing.
e. The bank statement shows that the bank collected $19,000 cash on a note receivable for the company, deducted a $20 collection expense, and credited the balance to the company’s Cash account. Severino did not record this transaction before receiving the statement.
f. Severino’s December 31 daily cash receipts of $9,583.10 were placed in the bank’s night depository on that date but do not appear on the December 31 bank statement.
3. Explain the nature of the communications conveyed by a bank when the bank sends the depositor (a) a debit memorandum and (b) a credit memorandum.
1. The petty cash fund of the Brooks Agency is established at $150. At the end of the current period, the fund contained $28 and had the following receipts: entertainment, $70; postage, $30; and printing, $22. Prepare journal entries to record (a) establishment of the fund and (b) reimbursement of the fund at the end of the current period.
Palmona Co. establishes a $200 petty cash fund on January 1. On January 8, the fund shows $38 in cash along with receipts for the following expenditures: postage, $74; transportation-in, $29; delivery expenses, $16; and miscellaneous expenses, $43. Palmona uses the perpetual system in accounting for merchandise inventory. Prepare journal entries to
(1) establish the fund on January 1(2) reimburse it on January 8 (3) both reimburse the fund and increase it to $450 on January 8, assuming no entry in part 2. (Hint: Make two separate entries for part 3.)
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