The following control procedures are used in Keaton Company for over-the-counter cash receipts.

For each procedure, explain the weakness in internal control and identify the control principle that is violated.

Procedure

Each store manager is responsible for interviewing applicants for cashier jobs. They are hired if they seem honest and trustworthy.
All over-the-counter receipts are registered by three clerks who share a cash register with a single cash drawer.
To minimize the risk of robbery, cash in excess of $100 is stored in an unlocked briefcase in the stockroom until it is deposited in the bank
At the end of each day, the total receipts are counted by the cashier on duty and reconciled to the cash register total.
The company accountant makes the bank deposit and then records the day’s receipts.

The following control procedures are used in Bunny’s Boutique Shoppe for cash disbursements.

(a)

For each procedure, explain the weakness in internal control and identify the internal control principle that is violated.

Procedure	Weakness
1. Each week, 100 company checks are left in an unmarked envelope on a shelf behind the cash register.
2. The store manager personally approves all payments before she signs and issues checks.
3. The store purchases used goods for resale from people who bring items to the store. Since that can occur anytime that the store is open, all employees are authorized to purchase goods for resale by disbursing cash from the register. The purchase is documented by having the store employee write on a piece of paper a description of the item that was purchased and the amount that was paid. The employee then signs the paper and puts it in the register.
4. After payment, bills are “filed” in a paid invoice folder.
5. The company accountant prepares the bank reconciliation and reports any discrepancies to the owner.

Q 3

The following information pertains to Cullumber Company.

1.Cash balance per bank, July 31, $8,538.

2.July bank service charge not recorded by the depositor $64.

3.Cash balance per books, July 31, $8,574.

4.Deposits in transit, July 31, $3,910.

5.$3,226 collected for Cullumber Company in July by the bank through electronic funds transfer. The collection has not been recorded by Cullumber Company.

6.Outstanding checks, July 31, $712.

(a)

Prepare a bank reconciliation at July 31, 2022. (List items that increase balance as per bank & books first.)

A new accountant at Splish Brothers Inc. is trying to identify which of the following amounts should be reported as the current asset “Cash and cash equivalents” in the year-end balance sheet, as of April 30, 2022.

1.$86 of currency and coin in a locked box used for incidental cash transactions.

2.A $11,900 U.S. Treasury bill, due May 31, 2022.

3.$340 of April-dated checks that Splish Brothers has received from customers but not yet deposited.

4.An $86 check received from a customer in payment of its April account, but postdated to May 1.

5.$4,230 in the company’s checking account.

6.$4,770 in its savings account.

7.$58 of prepaid postage in its postage meter.

8.A $26 IOU from the company receptionist.

(a)

What balance should Splish Brothers report as its “Cash and cash equivalents” balance at April 30, 2022?

Cash and cash equivalents balance at April 30, 2022